April 17, 2025

Resolving Bad Faith Insurance Claims in Texas

Houston policyholders often feel helpless when an insurance company unjustly denies, delays, or underpays a valid claim. That frustration can take a financial and emotional toll, especially when bills and repairs are piling up. You have legal rights and do not have to face insurance bad faith alone.

The Houston bad faith insurance attorneys at Callender Bowlin stand ready to help. Attorney Mark Callender and Attorney Josh Bowlin devote themselves to holding insurers accountable for unfair tactics. They know Texas insurance law in depth and understand how to fight for every dollar you deserve.

What Is a Bad Faith Insurance Claim in Texas?

A bad faith insurance claim happens when an insurance company violates its duty of good faith and fair dealing toward its own policyholder. In Texas, insurers must act reasonably, investigate thoroughly, and pay valid claims on time. If they ignore these responsibilities, you can pursue a legal claim for bad faith.

State law under Texas Insurance Code Chapter 541 and 542 explicitly prohibits deceptive or unfair practices. If an insurer unreasonably delays payment, denies a legitimate claim without cause, or misrepresents coverage, it may be acting in bad faith. For example, imagine your Houston home is badly damaged by a hurricane, but your insurer dismisses the claim as “pre-existing damage” despite clear evidence to the contrary. This behavior may qualify as bad faith.

These claims focus on how the insurer handled your coverage, separate from the original loss or injury. Texas law gives policyholders the right to seek extra damages for misconduct, ensuring insurers face real consequences when they fail their contractual obligations.

Can an Insurance Company Deny a Claim and Not Act in Bad Faith?

Not all denials are bad faith. Insurers can lawfully decline claims when policy exclusions or legitimate policy conditions apply. Understanding these valid reasons helps you differentiate a standard denial from one that violates your rights.

Common legitimate reasons for denial include:

• No coverage for the loss: If your policy excludes that type of damage or has expired.
• Unmet policy limits or conditions: Filing too late, failing to pay premiums, or other contract terms.
• Clear fraud or misrepresentation: If an insured lied in the application or about the claim.
• Policy exclusions or illegal acts: Losses caused by conduct not covered under Texas law.
• Medical necessity disputes (health policies): Treatments deemed experimental or not covered by the policy.

A straightforward example is flood damage: if your homeowner’s policy excludes floods (common in Houston without separate flood coverage), your insurer’s denial might be disappointing but not necessarily bad faith. But if there is no legitimate reason and your claim should be covered, yet it’s still denied, that’s when bad faith issues arise.

How Do Insurance Companies Act in Bad Faith?

Some insurers resort to tactics that disregard fairness. If you spot any of the following “red flags,” it may indicate your insurance company is acting in bad faith instead of honoring your claim:

• Unreasonable Denials: Rejecting a valid claim without giving an adequate reason.
• Excessive Delays: Prolonging the process, missing statutory deadlines, or repeatedly “losing” paperwork.
• Inadequate Investigation: Ignoring evidence or refusing to conduct a proper inspection of damages.
• Underpayment or Lowball Offers: Offering far less than the actual costs, hoping you’ll accept out of desperation.
• Misrepresentation: Misstating policy language or lying about coverage.
• Lack of Communication: Failing to answer calls or provide updates on claim status.
• Unreasonable Document Requests: Demanding endless paperwork to create delays.
• Bullying Tactics: Threatening to close your claim if you don’t accept a quick settlement.
• Sudden Policy Changes or Cancellation: Canceling your policy or reducing coverage as soon as you file a claim, without valid grounds.

These practices can occur across various insurance types: homeowners, auto, health, or life. If your insurer seems intent on making the process unnecessarily difficult, you may have grounds to suspect bad faith, particularly if the delays or denials lack a credible basis.

What Are Some Less Common Examples of Bad Faith by Insurers?

While most bad faith tactics fit the scenarios above, some insurers engage in more egregious behavior. These rare but serious examples demonstrate just how far bad faith can go:

• Discrimination in Settling Claims: Denying or reducing benefits based on race, religion, or other improper bias.
• Alteration of Records: Changing engineer or expert reports to falsely justify denying a claim.
• Using Unqualified or Biased Experts: Hiring so-called “specialists” known to favor insurers, who produce skewed opinions.
• Deliberate Violation of Deadlines: Ignoring Texas’s prompt-payment requirements hoping the policyholder won’t notice.
• Failure to Defend or Indemnify (Third-Party Liability): Refusing to defend you or settle within policy limits in a liability lawsuit, exposing you to personal risk.

If any of these sound familiar, collect any evidence you can and consult an attorney. Even though they occur less frequently, these underhanded tactics still appear, leaving policyholders financially and emotionally drained. Texas law is designed to punish such malicious conduct.

What Should I Do If I Suspect Bad Faith by My Insurer?

When you sense wrongdoing, taking practical steps can secure vital evidence and strengthen your position for any legal action. Early intervention often makes a significant difference.

• Document Everything: Keep copies of all communications, including letters, emails, phone logs, and adjuster reports.
• Don’t Settle Hastily: If you receive a lowball offer or denial, avoid signing documents that waive your rights until you’re sure you understand the claim’s worth.
• Request Written Explanations: Ask for clear reasons for any denial. Insurers must provide you with a reasonable basis for their decisions.
• Seek Legal Advice Right Away: An experienced bad faith insurance attorney, like those at Callender Bowlin, can review your policy and evidence. They know how to push back against insurer intimidation or stalling.

Consider filing a complaint with the Texas Department of Insurance if your claim is being improperly handled. Although regulatory complaints might not yield immediate financial recovery, they put added pressure on insurers to correct any misconduct. Ultimately, pursuing legal action with an attorney’s help remains the most direct route to recovering damages.

How Can I Prove My Insurance Company Acted in Bad Faith?

Proving bad faith in Texas hinges on showing that your insurer had no reasonable basis to deny or delay your claim and knew or should have known their actions were unjustified. In practice, there are two main avenues:

1. Common Law Bad Faith: This requires establishing that liability or coverage was reasonably clear, yet the insurer refused to pay or acted unreasonably.
2. Statutory Bad Faith: Violations of Texas Insurance Code (Chapters 541 or 542), such as missing prompt-payment deadlines or engaging in deceptive practices, can indicate bad faith.

Only the insured policyholder can sue their own insurer for bad faith. If you are able to prove the insurer withheld benefits without just cause or knowingly disregarded clear evidence of liability, the courts may award damages beyond your original claim amount. Documenting communications, comparing your insurer’s assessment with independent evaluations, and examining internal insurer files (via subpoena) are all ways to uncover bad faith.

An attorney like Attorney Bowlin or Attorney Callender can gather vital documents, consult with experts, and build a case that reveals whether the insurer crossed the line from a legitimate denial to misconduct.

What Compensation Can I Receive for a Bad Faith Insurance Claim?

In Texas, damages for bad faith extend beyond the policy’s original benefits. The law aims to correct the harm done by wrongful denials or delays and to penalize insurers for misconduct. Depending on your case, you may be entitled to:

• Contract Damages (Policy Benefits): The basic payout you originally sought for your covered loss.
• Consequential Damages: Financial harm that arose because of the insurer’s delay or denial, such as needing to take out loans or sustain business losses.
• Attorney’s Fees and Court Costs: Texas often allows the winning policyholder to recover reasonable legal expenses.
• Statutory Penalties & Interest: Texas can impose interest penalties (up to 18% annually) for improper delays under the Prompt Payment of Claims Act.
• Treble Damages: If the insurer knowingly acted in bad faith, damages may be tripled under Chapter 541.
• Punitive Damages: In especially egregious cases, insurers can face additional punitive damages meant to deter similar conduct.
• Mental Anguish or Emotional Distress: In certain instances, the stress and hardship caused by the insurer’s actions can be compensable.

Not every case will result in every category of damages, but these laws exist to protect Texans from insurance companies that disregard fair practices. If you can demonstrate willful misconduct, you can potentially secure compensation that goes well beyond the initial claim amount.

Do I Need an Attorney to Fight a Bad Faith Insurance Claim?

Insurance companies train adjusters and hire skilled legal teams to minimize payouts. Facing them alone often leads to unfair results.

Legal counsel offers several advantages:

• Case Analysis: Attorneys evaluate your policy, claim history, and insurer conduct to pinpoint bad faith violations.
• Negotiation & Legal Strategy: Presenting evidence of possible insurance code breaches can spur insurers to settle fairly.
• Access to Evidence: Lawyers can subpoena internal files, emails, and adjuster reports that individuals alone might never see.
• Protection of Your Rights: Once you have counsel, the insurer must communicate through your attorney, preventing bullying or misinformation.
• Trial Advocacy: If no fair settlement is reached, your attorney can bring the case before a court or jury, ensuring your side is powerfully represented.

Local knowledge is vital: Attorney Mark Callender and Attorney Bowlin understand Houston’s courts and commonly disputed insurance issues, including storm-related damage. They typically work on a contingency fee basis, meaning it costs nothing upfront to enlist their help, and they only get paid if you receive a favorable outcome.

Ready to Fight Back? – Free Consultation and Next Steps

Taking action promptly is crucial. In Texas, the deadline to file a bad faith claim can be as short as two years from the denied claim, so do not let time slip away. The sooner you call, the sooner you can start building a strong case.

For clients who have been wrongfully treated by their insurance providers, Texas law on bad faith insurance claims is crucial. You acquire a dependable ally who will battle tenaciously to make insurers liable for their acts when you hire a lawyer from Callender Bowlin.

You may manage the difficulties of bad faith insurance claims and obtain the reimbursement you are entitled to with our knowledge and commitment. Callender Bowlin can be reached at (713) 300-8700 or via our secure form to take a stand against injustice.