Understanding Your Rights and Insurance Company Duties - Navigating the Texas Insurance Code

When you purchase an insurance policy, you are entering into a legal agreement with an insurance company. In Texas, the law sets clear guidelines for how insurance companies should operate and what duties they owe to policyholders. The Texas Insurance Code is a critical piece of legislation that governs how insurers must treat you and the steps you can take if you believe they aren’t living up to their obligations.

1. Insurance Companies and Their Duties

Insurance companies in Texas have certain responsibilities under the law. These duties include:

• Fair Handling of Claims: Insurers must process claims fairly and promptly, ensuring that policyholders receive the benefits to which they are entitled. This includes investigating claims and making decisions in a reasonable amount of time.

• Honesty and Transparency: Insurers must act in good faith, meaning they should not misrepresent facts about the policy or the claim. They must provide clear, honest explanations when denying or altering a claim.

• Prompt Payments: Once a claim is accepted, insurers have an obligation to make payment within a reasonable time frame. Unnecessary delays in processing claims or paying out settlements could violate the insurer’s duties.

These obligations ensure that you, the policyholder, are treated fairly, and that the insurer upholds its end of the agreement. Unfortunately, not all insurance companies follow these guidelines, which is why the Texas Insurance Code exists to protect consumers.

2. Texas Insurance Code

The Texas Insurance Code is a comprehensive set of rules designed to regulate the insurance industry and protect the rights of policyholders. It covers a wide range of topics, including licensing requirements for insurance agents, the terms of insurance policies, and the handling of claims. Key provisions include:

• Unfair Claims Settlement Practices: The Texas Insurance Code prohibits insurers from using deceptive practices to avoid paying valid claims. It requires insurance companies to act in good faith and prohibits misrepresentation of policy terms, failure to investigate claims properly, or unreasonable delays in claims handling.

• Consumer Protections: The Code provides several protections to consumers, such as requiring insurers to provide clear explanations for denied claims, outline policy benefits, and give policyholders the opportunity to appeal unfavorable decisions.

• Statutory Penalties: If an insurer violates the terms of the Insurance Code, they may be subject to penalties, including fines, compensatory damages, and even punitive damages in cases of gross misconduct.

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3. Bad Faith Claims

One of the most important aspects of the Texas Insurance Code is its protection against bad faith insurance practices. Bad faith occurs when an insurer refuses to honor a valid claim, mishandles the claim process, or engages in deceptive practices to avoid paying out.

Examples of bad faith include:

• Denying a claim without a reasonable explanation.

• Failing to investigate a claim properly.

• Delaying payment without a legitimate reason.

• Offering settlements that are far below the actual value of the claim.

When an insurer acts in bad faith, policyholders may file a lawsuit for damages. In Texas, you could recover the original claim amount, attorney’s fees, and in some cases, punitive damages. Proving bad faith can be complex, as it requires showing that the insurer knowingly violated the Texas Insurance Code or acted in an unreasonable manner.

4. Other Claims Under the Texas Insurance Code

Beyond bad faith claims, the Texas Insurance Code also allows for other types of legal claims against insurers. These claims can include:

• Breach of Contract: If an insurer fails to fulfill the terms of the insurance policy (e.g., not paying the agreed-upon benefits), the policyholder may file a breach of contract lawsuit.

• Deceptive Trade Practices: Under the Texas Deceptive Trade Practices Act (DTPA), insurers can be held accountable for engaging in deceptive acts or practices, such as false advertising or fraudulent representations about policy terms.

• Misrepresentation: If an insurance company provides misleading or false information regarding coverage, policy terms, or claims processing, they could face legal consequences under the Texas Insurance Code.

• Failure to Defend: In liability insurance claims, insurers have a duty to defend their policyholders in lawsuits. If they fail to do so, the policyholder may have grounds to file a claim for damages.

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5. Steps to Resolution

If you believe an insurance company has acted improperly, there are several steps you can take to resolve the issue:

• Contact Your Insurance Company: Before taking legal action, it’s important to first contact your insurer to discuss the issue. Sometimes, disputes can be resolved through a simple conversation or re-evaluation of your claim.

• File a Complaint with the Texas Department of Insurance (TDI): If your insurer is not responding fairly or you believe they’ve violated the Texas Insurance Code, you can file a complaint with the TDI. They will investigate the claim and can assist in resolving the dispute.

• Seek Legal Advice: If your claim is still unresolved or if you believe your insurer is acting in bad faith, it’s time to consult an attorney. An experienced lawyer specializing in insurance disputes can help you understand your rights, gather evidence, and guide you through the legal process.

• File a Lawsuit: In some cases, pursuing a lawsuit may be necessary. Whether it’s for bad faith, breach of contract, or deceptive practices, filing a lawsuit can provide you with the opportunity to recover damages.

6. The Importance of Statute of Limitations

When pursuing any legal action related to an insurance dispute, it is crucial to be aware of the statute of limitations (SOL) for your specific claim. The SOL sets the time limit within which you must file a lawsuit, and missing this deadline can result in losing your right to take legal action.

• Breach of Contract Claim: In Texas, you generally have 4 years to file a breach of contract lawsuit. This is the time limit if your insurer fails to meet the terms of your policy.

• Texas Deceptive Trade Practices Act (DTPA) Claim: Claims under the DTPA must be filed within 2 years from the date of the deceptive act or practice.

• Bad Faith Claim: If you're pursuing a bad faith insurance claim, the statute of limitations is also 2 years from the date the insurer’s wrongful conduct occurred.

It’s important to note that the clock on the statute of limitations starts ticking when the cause of action occurs, not necessarily when you first become aware of the issue. Keeping track of these deadlines is essential to ensuring your case is not dismissed due to a time-barred claim.

If you believe you have a valid claim, it’s advisable to consult with an attorney as soon as possible to ensure that your legal rights are protected and that you meet all necessary deadlines.

7. Contact an Attorney

If you suspect your insurer is violating the Texas Insurance Code or if you’re dealing with a bad faith claim, contacting an experienced attorney is crucial. A lawyer can help you navigate the complexities of insurance law, protect your rights, and ensure that you receive the compensation you deserve.

Attorneys specializing in insurance law can help you:

• Review your insurance policy and the handling of your claim.

• Gather evidence and documentation to support your case.

• Represent you in court or settlement negotiations.

Insurance disputes can be overwhelming, but having the right legal support can make all the difference in achieving a fair outcome. Whether you’re in need of an attorney to assist you in reviewing your insurance claim, addressing bad faith practices, or navigating the complexities of an insurance dispute, our attorneys at The Spencer Law Firm are ready to assist you every step of the way. For a personalized review contact Texas attorney Bonnie Spencer at (713) 961-7770. 

by Natalie Maciel

Act Now – The Statute of Limitations is Complicated!

The Statute of Limitations (SOL) is not just a deadline—it’s a legal ticking clock that can make or break your ability to seek justice. Applying and interpreting the SOL is extremely complex, and waiting too long could mean losing your right to take legal action altogether. Different claims have different time limits, and in some cases, delays in recognizing an insurer’s wrongdoing can shorten the window even further.

That’s why you cannot afford to wait. The sooner you consult an attorney, the stronger your case will be. The Spencer Law Firm understands the intricate legal nuances of Texas insurance disputes, and we have the expertise to ensure that deadlines don’t stand in the way of the justice and compensation you deserve.

Why The Spencer Law Firm?

• Unmatched Experience – Our firm specializes in insurance disputes and understands the Texas Insurance Code inside and out.

• Aggressive Advocacy – We don’t just file claims; we fight to ensure insurers uphold their obligations.

• Personalized Legal Strategy – Every case is different, and we tailor our approach to maximize your chances of success.

• Results-Driven Representation – We’re not here for delays or settlements that don’t fully compensate you—we fight for what you are truly owed.

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Don't risk your claim by waiting. Call The Spencer Law Firm today at (713) 961-7770 to protect your rights before it’s too late! 

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