Bad Faith Insurance Practices in Texas: What to Watch For and How to Protect Yourself

When you file an insurance claim, whether it’s after a car accident, storm damage, or a personal injury, you expect your insurance company to act fairly and honor the terms of your policy. Unfortunately, this doesn’t always happen. In some cases, insurers delay, underpay, or deny valid claims without justification. When they do, it may be considered bad faith insurance practices, which are illegal in Texas.

At JML Injury Law, we’ve seen firsthand how these tactics harm hardworking Texans. If you suspect your insurer is acting in bad faith, this guide will help you recognize the red flags, understand your rights under Texas law, and know when it’s time to seek legal help.

What Is Bad Faith in Insurance?

Bad faith occurs when an insurance company fails to treat its policyholder fairly or deliberately violates its duty to investigate and pay legitimate claims. Insurers in Texas have a legal obligation to handle claims promptly, honestly, and transparently. When they don’t, they can be held accountable in court.

The Duty of Good Faith and Fair Dealing

Under Texas law, all insurance contracts include an implied covenant of good faith and fair dealing. This means the insurer must:

• Thoroughly investigate claims

• Evaluate claims objectively

• Pay valid claims promptly

• Communicate clearly and honestly with policyholders

Failure to do so may give rise to a bad faith insurance claim, separate from your original claim for damages.

Common Examples of Bad Faith Insurance Practices in Texas

Here are some of the most common ways insurers act in bad faith:

1. Unreasonable Delays

Texas law requires insurers to respond to and process claims within strict timelines. Unjustified delays in processing your claim, especially when accompanied by silence or excuses, are a major red flag.

2. Denying a Valid Claim Without Explanation

An insurer cannot simply say “your claim is denied” and move on. They are required to:

• Provide a written reason for the denial

• Reference specific policy provisions

• Offer a legitimate basis for their decision

If they don’t, their actions may qualify as bad faith.

3. Offering Unreasonably Low Settlements

Insurers sometimes offer lowball settlements, hoping that policyholders are desperate enough to accept them. If their offer doesn’t reflect the actual value of your damages—and they won’t justify the offer—it may indicate bad faith.

4. Misrepresenting Policy Terms

Some insurers purposely misstate what your policy covers, hoping to confuse you. This includes:

• Falsely claiming certain damages aren’t covered

• Quoting incorrect deductibles or limits

• Failing to disclose benefits you’re entitled to

5. Failing to Investigate the Claim

A complete and timely investigation is a key responsibility of any insurance company. If your insurer refuses to:

• Interview witnesses

• Review police reports

• Examine evidence like medical records or photos

…they are likely violating their duty of good faith.

6. Retaliation or Intimidation

Some insurers go as far as threatening to cancel your policy, raise your premiums, or even accuse you of fraud for simply pursuing your rights. This type of conduct is not only unethical—it’s illegal.

Texas Laws That Protect You Against Bad Faith

Texas has strong laws that protect consumers from deceptive or unfair insurance practices.

Texas Insurance Code – Chapter 541

This law prohibits insurers from engaging in unfair or deceptive acts, such as:

• Misrepresenting facts or policy provisions

• Failing to promptly investigate or pay claims

• Denying coverage without a reasonable basis

Violations of Chapter 541 can entitle policyholders to:

• Actual damages (e.g., financial loss)

• Attorneys’ fees

• In some cases, punitive damages for willful misconduct

Texas Prompt Payment of Claims Act (Chapter 542)

This law establishes timelines insurers must follow:

• Acknowledge your claim within 15 days

• Begin investigating promptly

• Accept or deny the claim within 15 business days after receiving all necessary documents

• Pay accepted claims within 5 business days of approval

If they violate these deadlines, they may owe you:

• The claim amount

• 18% annual interest on the unpaid amount

• Attorney’s fees

How to Protect Yourself From Bad Faith Insurance Tactics

1. Keep All Records

From the moment you file a claim, keep everything in writing. Save:

• Emails, letters, and text messages

• Notes from phone calls (include names, dates, and times)

• Copies of your claim and supporting documents

2. Know Your Policy

Read your insurance policy carefully. Understand:

• What’s covered and what’s excluded

• Deadlines for reporting claims

• Applicable limits, deductibles, and endorsements

This helps you counter misrepresentations and delays.

3. Follow Up Regularly

If the insurer isn’t responding, follow up in writing. Document every attempt to get updates, and ask for timelines and explanations.

4. Get a Second Opinion

If you suspect the insurer’s offer is low, seek estimates or expert evaluations to assess the true value of your claim.

5. Consult a Personal Injury or Insurance Bad Faith Lawyer

If you’re hitting a wall with your insurance company, don’t go it alone. An experienced Texas personal injury law firm like JML Injury Law can:

• Review your policy

• Evaluate your insurer’s conduct

• Help you file a bad faith lawsuit if necessary

When to Call a Lawyer for Bad Faith Insurance

It’s time to involve an attorney when:

• You receive vague or repeated denials

• The insurer delays for weeks or months with no resolution

• Your valid claim is rejected with no clear explanation

• You’re offered a settlement far below your documented losses

• You’re being pressured or intimidated

• The insurer refuses to reimburse covered damages

At JML Injury Law, we aggressively pursue insurers who violate Texas law. We fight for fair compensation—and justice—on behalf of injury victims and policyholders alike.

Bad Faith Insurance in Personal Injury Claims

Bad faith isn’t limited to property claims. It also affects personal injury cases, especially when:

• The at-fault driver’s insurer denies liability despite clear evidence

• Your own uninsured/underinsured motorist (UM/UIM) provider won’t pay

• Your health insurer refuses to cover medically necessary treatment

• Medical bills go unpaid due to insurer foot-dragging

When an insurer’s bad faith interferes with your injury recovery, it adds insult to injury—and we’ll hold them accountable.

Don’t Let the Insurance Company Take Advantage

Insurance companies are for-profit businesses. While many honor their commitments, some delay, deny, and underpay claims in hopes that you’ll give up. At JML Injury Law, we know their tactics, and we know how to fight back. If you suspect you’re a victim of bad faith insurance practices in Texas, you don’t have to face the system alone. Let us review your case, enforce your rights, and help you get the compensation you deserve.

Don’t let the insurer bully or shortchange you. If your claim is being unfairly denied, delayed, or underpaid, contact JML Injury Law for a free consultation. We’re here to protect you from bad faith and fight for the justice you deserve.