Whether you own a home, a business or both, you want to protect your investment. Because a fire, storm and other events can destroy your property, you have a comprehensive insurance policy. This policy is a legally binding contract that requires your insurer to pay for covered damages in exchange for your monthly premiums. Regrettably, insurance companies do not always live up to their end of the bargain.
If your insurer delays payment, improperly investigates or unreasonably denies your claim, you may have a bad-faith insurance claim. With this cause of action, you force your insurer to do what is right. In the Lone Star State, though, you have the burden of proving your insurer acted in bad faith. Typically, there are two ways to do so:
A common law bad-faith claim
Your insurance provider may have denied your damage claim, even though it is reasonably clear the insurer should have approved it. This is a traditional common law bad-faith theory that requires establishing two elements:
- Despite your having a valid claim, your insurer issued a denial.
- Your insurer’s denial rationale was unreasonable.
A deceptive-acts or unfair-practices claim
While you certainly may be able to proceed with a common-law bad-faith claim, you also have some statutory options. In Texas, the Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Act and the Unfair Claim Settlement Practices Act protect consumers from certain types of insurance bad faith. If your insurer does any of the following, it may be liable for damages under Texas law:
- Denying a claim after an unthorough investigation
- Neglecting to process claims reasonably quickly
- Misrepresenting material facts about insurance coverage
- Failing to act in good faith
As a property owner, you have an interest in protecting your real estate. While having a comprehensive insurance package is part of the equation, you also need your insurer to process and approve your claim. If your insurer acts in bad faith, however, you likely must act quickly to assert your legal rights.