Bad Faith and Third-Party Insurance Claims in Texas

Most individuals who file personal injury claims within the state of Texas will have to deal with insurance companies at some point. Whether you sustained an injury in a car accident or from using a defective product, most claim payouts come not from the defendant, but from his or her insurance company. Unfortunately, some insurance companies illegally take advantage of a victim’s lack of knowledge to deny or unreasonably stall claim payouts.

Here’s what you need to know about bad faith insurance claims and how to handle them.

Bad Faith and Third-Party Claims

The idea that an insurance company must exercise good faith in defending insurance claims is outlined in the Stower’s Doctrine G.A. Stowers Furniture Co. v. American Indem. Co., 15 S.W.2d 544 (Tex. Comm’n App. 1929), holds that insurance companies have a duty to act in good faith in settling a liability claim.

Bad faith insurance claims may only be pursued by first parties, the policyholder versus the insurance company.

A third-party claim is made by a party that is not the policyholder or the insurance company.  A third party insurance claim is made by someone who is not the policyholder or the insurance company. Unfortunately, Texas courts have maintained that third parties may not pursue insurance bad faith claims.

Texas law does not recognize a cause of action for breach of the duty of good faith by an insurance company for the handling of third-party claims.

What to Do If You Suspect Insurance Bad Faith

If you suspect that your insurer is acting in bad faith, you may be eligible to collect the following types of compensation:

  • The full extent of damages you incurred, plus any court costs and legal fees
  • A court-issued order for the insurer to reasonably carry out the act (or failure to act) that resulted in the complaint
  • Any other form of relief the court deems necessary

Insurance bad faith can be a legally complex concept. If you suspect that an insurance company is violating its duty of good faith and fair dealing, the most important thing you can do is contact an attorney to discuss your legal options. An experienced Houston injury attorney can help determine if insurance bad faith occurred and hold the insurer legally responsible for its actions.

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