Bad Faith Insurance Practices in Texas: When Can You Sue Your Insurer?

Insurance is supposed to give peace of mind. But what happens when your insurance company doesn’t hold up its end of the deal? In Texas, this is called bad faith insurance. When an insurer delays, denies, or avoids paying a valid claim, policyholders may have legal grounds to sue.

Understanding bad faith insurance in Texas is important if you’ve faced unfair treatment from your insurer. Let’s break down what counts as bad faith, what Texas law says, and when it makes sense to take legal action.

What Is Bad Faith by an Insurance Company?

Insurance companies have a duty to handle claims fairly and promptly. If they fail to do this without a valid reason, they may be acting in bad faith. Some common signs of bad faith behavior include:

Unreasonable delays in processing or paying a claim
Denying a claim without a proper investigation
Offering less money than your claim is worth
Misrepresenting the terms of your policy
Failing to explain why a claim was denied
Ignoring your communications about a claim

These tactics can leave policyholders in difficult situations. Whether it’s a delayed insurance payout in Texas or a wrongly denied insurance claim, you have legal protections.

What Texas Law Says About Bad Faith Insurance

Texas law gives consumers strong rights when dealing with insurance companies. The Texas Insurance Code and the Deceptive Trade Practices Act (DTPA) both offer ways to hold insurers accountable.

Under Section 541 of the Texas Insurance Code, it’s illegal for insurers to engage in unfair or deceptive acts. This includes not attempting in good faith to settle a claim when liability is clear.

The Texas Insurance Code bad faith rules also cover actions like refusing to pay claims without a reasonable investigation or misleading a policyholder about their rights.

You may also have a case under the DTPA if the insurer used false or misleading statements, or acted in a way that was unfair to you as a consumer.

When You Can Sue Your Insurance Company

If you think your insurer acted in bad faith, you may be able to file a Texas insurance bad faith lawsuit. But before going to court, you should understand when it makes sense to sue.

Here are some situations where suing may be an option:

The insurer denied your claim without giving a valid reason
The insurer took too long to respond or process the claim
The payout offered was far below the actual damages
The insurance company refused to investigate your claim
You have proof that the company lied about your policy terms

These examples may show an insurer breach of duty in Texas. Keep in mind: not every denial is bad faith. If the denial is based on facts or policy terms, it may be legal. But if the insurer ignored facts, delayed action, or acted dishonestly, that’s a different story.

Proving Bad Faith

To succeed in a Texas bad faith insurance claim, you need evidence. Texas courts often look for:

Proof that the claim was valid
Evidence the insurer didn’t act reasonably
Internal documents showing delays, denials, or low offers were intentional

In many cases, your attorney can request internal communications and claim files from the insurance company. These can show if there was a pattern of unfair insurance practices in Texas.

If your claim is successful, you may be able to recover:

The amount owed under your insurance policy
Damages for emotional distress or financial harm
Legal fees and court costs
In some cases, extra damages to punish the insurer (punitive damages)

Time Limits to File a Bad Faith Lawsuit

Texas has deadlines for filing lawsuits. If you’re suing an insurance company in Texas, you usually have two years from the date of the bad faith action. Waiting too long could mean you lose your right to take legal action.

Acting quickly is important. Even if you’re still dealing with the insurer, speak with a lawyer early. They can help protect your rights and gather evidence before it disappears.

What to Do If You Suspect Bad Faith

If your insurer is delaying, denying, or lowballing your claim, here are steps to take:

Keep Records: Save all emails, letters, phone logs, and documents related to your claim.
Review Your Policy: Understand what coverage you have and what exclusions apply.
Request Written Explanations: Ask for reasons behind any denial or delay.
File a Complaint: You can report bad faith to the Texas Department of Insurance.
Talk to a Lawyer: A legal professional can tell you if you have a case and what to do next.

Speak with The Law Office of Kyle J. Moore, PLLC

If you’re dealing with bad faith insurance in Texas, you don’t have to go through it alone. The Law Office of Kyle J. Moore, PLLC can help you understand your options and fight back against unfair treatment by your insurer.

We also handle personal injury, small business law, general civil litigation, appellate law, and more. Whether your issue is a denied claim or a broader legal matter, our law firm brings clear communication and real results.