We often rely on insurance when sudden injuries or accidents occur. If your insurance company denies your claim when it should have been approved, it may be engaging in bad faith.
Texas has some of the most comprehensive insurance bad faith laws in the country, primarily governed by the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA). These laws impose specific duties on insurers: they must acknowledge your claim within 15 days, begin investigating it promptly, and accept or deny it within 15 business days of receiving all required documentation. If they fail to meet these obligations — or deny a valid claim without a reasonable basis — they’ve potentially committed bad faith.
Common examples of insurance bad faith in Texas auto accident claims include: denying a claim without conducting a real investigation, offering a settlement so low it bears no reasonable relationship to the damages, unreasonably delaying payment, misrepresenting the terms of your policy, pressuring you to accept a quick settlement before you understand your full injuries, and canceling or failing to renew a policy without proper notice.
If you can prove bad faith, Texas law allows you to recover the amount owed on the original claim plus 18% annual interest plus attorney’s fees under Texas Insurance Code § 542. Under the DTPA, you may be entitled to up to three times your actual economic damages if the insurer’s conduct was knowing or intentional. These “treble damages” are a powerful tool that makes litigation risky for insurers acting in bad faith.
The challenge is that insurance companies are sophisticated, well-funded, and aggressive. They have in-house counsel and adjusters whose job is to minimize your payout. Building a bad faith case requires a detailed review of all claim correspondence, the insurer’s internal handling file, and a thorough understanding of Texas insurance law. This is not a case you want to handle on your own.
Cap City Injury Attorneys has experience taking on insurers — both your own and the at-fault party’s — when they refuse to honor their obligations. We review every denial letter, document every delay, and hold them accountable under Texas law. You pay nothing unless we win.
Get a free, private case analysis from our Austin, TX bad faith insurance lawyers by calling Cap City Injury Attorneys at (512) 612-3110.
Can I Sue an Insurance Company for Denying My Claim in Bad Faith?
The Supreme Court of Texas did not recognize a cause of action for bad faith until the case of Arnold v. Nat. County Mut. Fire Ins. Co. The duty of good faith and fair dealing arises in insurance contracts because of the “special relationship” between the insurance provider and the insured. The parties have inherently unequal bargaining power, and a duty of good faith keeps them from taking advantage.
Insurance companies are legally required to play fair when processing claims. According to Tex. Ins. Code § 542.003(a), insurance companies are prohibited from engaging in any practices that may be considered unfair claims practices. However, this statute does not create a legal cause of action but only describes prohibited insurance practices.
What Constitutes Bad Faith?
Under Tex. Ins. Code § 542.003(a), numerous practices are considered illegal and may be deemed bad faith practices in your lawsuit:
Misrepresentation
A common form of bad faith involves intentional or knowing misrepresentation of important facts and details about your claim or insurance policy. Your insurance company might have misled you about what the policy covers or how you file claims, so that they can later deny you.
Unnecessary or Unreasonable Delays
Once your insurance company receives your claim, it must be acknowledged within 15 days, unless special conditions apply, according to Tex. Ins. Code § 542.055(a). If your insurance company causes unnecessary delays in your claim, they may be acting in bad faith.
Denying a Valid Claim
More overt acts of bad faith may involve wrongfully denying a claim that should be covered. Sometimes, this kind of bad faith is more obvious. For example, if your policy very clearly and explicitly covers your claim, but it is denied anyway with little explanation, you should call a lawyer immediately.
Failing to Investigate a Claim
Certain claims require investigation to be properly processed and approved. If your insurance company fails to investigate or does not investigate adequately, it might deny your claims as a result. In such a case, you can sue them for failing to investigate.
Other Unfair Practices
- Compelling a policy holder to initiate a lawsuit to recover the amount due by offering significantly less than what is ultimately recovered in the lawsuit.
- Failing to maintain and save important records and communications regarding your policy and complaint.
- Doing anything else that the insurance commissioner determines is an unfair claim settlement practice.
Preparing to Sue an Insurance Company for Bad Faith Dealings
Before filing a lawsuit against an insurance company, get help from a lawyer. Your attorney can review your claim to determine if any bad faith practices occurred and determine the value of your claims.
Contact an Attorney
Insurance companies often have robust legal departments ready to take down your claims as soon as you bring them up. The best thing you can do for yourself is to get help from an experienced attorney.
Your attorney can identify the bad faith actions taken by your insurance company, find evidence to prove your claims, and build your case so that it is strong and you are more likely to get the compensation to which you are entitled.
Gather Evidence
A good place to start with evidence is your insurance policy itself, as this is a legal contract between you and your insurance provider that spells out the terms and conditions of how you are to be compensated. We should also save all communications you have had with your insurance company, including letters, emails, and phone calls.
Prepare a Formal Legal Complaint
Your lawsuit begins with a formal complaint that outlines how we believe bad faith insurance practices occurred, provides evidence to support your claims, and explains your damages. Our Austin, TX personal injury lawyers must draft the complaint carefully, as it may set the tone for the rest of the case.
How to Prove Your Claim Was Denied in Bad Faith
Proving your claim was denied in bad faith requires extensive evidence. Below are a few good places to begin collecting evidence for your case.
Review Your Insurance Policy
First, we must look over the terms of the policy that covers your claims. In some cases, a policy holder’s claims are obviously covered, and the bad faith denial by their insurance company is readily apparent. In others, the insurance company might be taking advantage of vague terms or unfair loopholes to deny claims.
Communications from Your Insurance Company
From the moment you submit your claims to your insurance company, everything should be properly documented. When you received a denial, it should have come in the form of a formal letter in the mail. Any communication between you and your insurance company, including your denial letter, emails, other letters, and more, may be used as evidence to build your case.
Depositions of Insurance Representatives
To gather more facts and information, we may need to depose insurance representatives and others connected to the case. Depositions are a formal question-and-answer session where those being deposed are placed under oath. This is not part of the trial and occurs as part of the discovery process.
FAQ About Bad Faith Insurance Cases in Texas
Q: Can I sue my own insurance company for bad faith in Texas?
A: Yes. First-party bad faith claims against your own insurer are common in Texas, especially in uninsured motorist (UIM) and underinsured motorist (UIM) disputes where your insurer wrongfully denies or underpays your claim.
Q: What is the difference between a regular denial and a bad faith denial?
A: A regular denial may be legitimate if the claim falls outside policy coverage. A bad faith denial occurs when the insurer denies a valid claim without reasonable investigation or a sound coverage basis.
Q: How long do I have to file a bad faith insurance claim in Texas?
A: The statute of limitations for Texas Insurance Code claims is generally two years from the date of the violation. Consult an attorney promptly to protect your rights.
Q: What damages can I recover in a bad faith insurance lawsuit in Texas?
A: You may recover the original claim amount, 18% annual interest, attorney’s fees, and potentially up to three times actual damages under the DTPA if the insurer acted knowingly.
Q: Does an insurer’s low settlement offer automatically constitute bad faith?
A: Not automatically — but a settlement offer that is unreasonably low relative to the documented damages and is not based on a legitimate investigation can be evidence of bad faith.
Q: What if the insurance company just keeps delaying my claim?
A: Unreasonable delay is a form of bad faith under the Texas Insurance Code. If the insurer misses the statutory deadlines without justification, they may owe you additional penalties.
Q: Can I file a bad faith claim even if I was partially at fault for the accident?
A: Yes. If a valid portion of your claim was denied unreasonably, the at-fault percentage does not shield the insurer from bad faith liability on the portion they owed you.
Q: Do I need an attorney to pursue a bad faith claim in Texas?
A: While not legally required, these cases are complex and involve insurance law, DTPA, and potentially federal regulations. An experienced attorney dramatically improves your chances of a meaningful recovery.
A Real Austin Scenario: When an Insurer Plays Games
An Austin nurse was T-boned near the intersection of Ben White Blvd and South Congress by a driver who ran a red light. Liability was clear — the police report documented the signal violation. Despite two months of documented chiropractic and orthopedic treatment, the at-fault driver’s insurer sent a form letter denying the claim, citing “insufficient evidence of causation.”
The nurse hired Cap City Injury Attorneys. We sent a formal demand with all medical records, the police report, and photos. The insurer still delayed for 60 days beyond Texas’s statutory deadline without explanation — a textbook bad faith violation under Tex. Ins. Code §542.058. We filed suit on both the underlying injury claim and the bad faith claim. The case settled for policy limits plus $18,000 in statutory penalties and attorney’s fees. The key insight: when an insurer sits on a clear-liability claim past 15 business days without reason, they’ve likely already broken the law.
Speak to Our Texas Bad Faith Insurance Attorneys for Help Immediately
Get a free, private case analysis from our Round Rock, TX personal injury lawyers by calling Cap City Injury Attorneys at (512) 612-3110.
Matthew Mandelker is the Founder, CEO, and Managing Attorney of Cap City Injury Attorneys, bringing over 15 years of personal injury law experience in Texas to every case he handles. A graduate of St. Mary’s University School of Law, Matthew has served as a partner, sole practitioner, and associate at some of the largest personal injury firms in Texas, giving him a unique perspective on what great legal representation looks like. He founded Cap City Injury Attorneys to combine the sophistication of a major firm with the personalized service of a boutique practice, ensuring every client receives direct attorney access, honest communication, and relentless advocacy. When he is not fighting for his clients, Matthew can be found on Lake Travis or spending time with his 10-year-old twins, and that same dedication to family is the foundation of everything he does at the firm.