The latest installment in our series of blog posts outlining what constitutes insurer bad faith from state to state focuses on the State of Texas.

The Texas statutes and bad faith tort law are closely related. An insurance company’s bad faith gives rise to a violation of the Deceptive Trade Practices-Consumer Protection Act and Texas Insurance Code.  If an insurance company has not acted in bad faith, it cannot be liable under the statutes.  Ultimately, a private individual whose disability insurance claim was unfairly denied can bring an action against the insurance company under either the statute or the state tort law.

The Statute: Tex. Ins. Code Sec. 541.060

The Rules: It is considered by law to be an unfair or deceptive act or practice for an insurance company to engage in the following unfair settlement practices:

• Misrepresenting a material fact or policy provision to the person making the claim.
• Failing to bring about a fair, prompt, equitable settlement when the disability insurer’s responsibility to pay has become reasonably clear.
• Failing to provide a claimant with a prompt and reasonable basis, grounded in the policy or the applicable law, or the denial of the claim or a settlement offer.
• Failing to affirm or deny coverage or submit a reservation of rights.
• Refusing a settlement offer on the basis that other coverage may be available, except as specifically provided in the claimant’s policy.
• Refusing to pay a disability insurance claim without conducting a reasonable investigation.
• Undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim.

The Standard:  A disability insurance company is liable for bad faith if it knew or should have known that it was reasonably clear that the claim was covered.  An insurance company cannot escape bad faith liability merely by failing to investigate a claim so that it can contend that its obligation to pay was never reasonably clear.

 The attorneys at Comitz | Beethe provide legal representation to protect the disability benefits of medical and dental professionals nationwide and throughout metropolitan Phoenix, Tucson, Scottsdale, Sedona, Flagstaff, Lake Havasu City, Yuma, and Prescott. We provide disability income claim advice, assistance with filing disability claims, including completion of disability claim forms and representation in disability insurance litigation.