An earlier question on this blog was, How does someone in Grand Prairie, Dallas, Fort Worth, Arlington, Keller, Azle, Coppell, Sasche, Bedford, or anywhere else in Texas know if they are experiencing conduct of bad faith by their insurance company? Let’s look at the current standard for judging this issue.
In 1997, the Texas Supreme Court, issued an opinion in the case, The Universal Life Insurance Company, AIA Services Corporation, and AIA Insurance, Inc. v. Ida M. Giles. In this case the court adopted as the liability standard the statutory language in Article 21.21, Section 4(10) of the Texas Insurance Code. (The current version is Texas Insurance Code, Section 541.060(a)(2)(A)). Under that standard, an insurance company breaches its duty of good faith and fair dealing by “failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.”
This statutory standard adopted in the Giles case takes the place of the common-law standard for unreasonable denying a claim or unreasonably delaying payment. The court’s analysis in the Giles case also supports adopting the statutory standard for failing to conduct a reasonable investigation. That standard is found in the Texas Insurance Code, Section 541.060(a)(7), which prohibits “refusing to pay a claim without conducting a reasonable investigation with respect to the claim.”
Section 541.060 of the Texas Insurance Code is titled, “Unfair Settlement Practices” and any violation of the provisions found within this statute are probably violations of the insurance companys duty of good faith and fair dealing to the people and businesses it insures.
The same arguement can be made regarding Section 541.061, which is titled, Misrepresentation of Insurance Policy.
Furthermore, violations of Subchapter A, titled, “Unfair Settlement Practices”, lists lots of actions and inactions that can get an insurance company in trouble. These statutes start at 542.001.
Another section of the Insurance Code, that when violated by an insurance company can be considered bad faith, is Subchapter B, titled, Prompt Payment of Claims Act, and starts at Section 542.051 and goes through 542.061.
A reading of the Giles case and scanning the statutes listed above will give someone a small understanding of how the laws related to the duty of good faith and fair dealing works in Texas. But the only way to be sure is to consult with an experienced Insurance Law Attorney. As in almost all matters legal in nature, a good understanding of the facts in a particular situation have to be looked at along with a careful reading of the applicable statutes and case law in order to properly advise someone on a course of action.