HOUSTON CONSUMER LAW ATTORNEY

Under Texas law, insurance companies owe a fiduciary obligation to their insured. This means that insurance companies must exercise the duty of good faith and fair dealing in their relationship with the insured. Failure to do so will give rise to a cause of action commonly known as “Insurance Bad Faith”. Insurance companies have a duty to pay their policyholders’ claims fully and in a timely manner. Even if the insurance provider is not engaging in fraudulent activity, certain actions by the insurer may still be evidence of bad faith on the part of the insurer.

Among the numerous examples of how an insurer can commit bad faith and deny your claim are:

* Failure to investigate a claim in a timely manner
* Unnecessary delay in payment of benefits
* Offering inadequate, unfair value for losses suffered
* Unfair interpretation of the insured’s policy
* Refusal to reach a settlement in the case
* Refusal to reimburse you for the entirety of your loss.

When an Insurance Company violates its duty of good faith and fair dealing, or otherwise violates the Texas Insurance Code it may give rise to a lawsuit on behalf of the insured. In the lawsuit, the insured may be entitled to statutory penalties, treble damages and attorney fees.

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The Stowers Doctrine holds that a liability insurer that undertakes the defense of an insured has a duty to act in good faith in settling a liability claim. Courts have interpreted the “duty to defend” language in standard insurance policies as giving liability insurers absolute control over the conduct of the defense. Whether to settle a liability claim is therefore completely within the discretion of the liability insurer under the terms of the policy contract. If the injured party makes a pretrial offer to settle a liability claim for an amount within the liability policy limit, the insurer is not obligated to accept the offer and has the contractual right to take the claim to trial. To protect insureds from abusive practices, courts impose an extra-contractual duty on insurers to act in good faith when deciding whether to reject a pretrial settlement offer that is within policy limits. If the insurer acts unreasonably and rejects a good pretrial settlement offer within policy limits, unwisely takes the claim to trial, loses, and the jury returns a verdict against the insured for an amount above policy limits, the defaulting insured may be liable to pay the entire judgment under the Stowers Doctrine, even the excess portion above policy limits.

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