Even before we start picking up the pieces from the central Texas and Hill Country floods, telephones of insurers in distant states must stand in watchful anticipation of the deluge to come. Much like those affected by the central Texas fires just a few years ago, today’s insured must surely be dreading the insurance company push back. Perhaps it is time to review what the Texas Deceptive Trade Practices Act does not allow.
Texas Deceptive Trade Practices Act singularly, and in conjunction with, the Texas Insurance Code cuts a wide swath of violations, the most important at this time is likely to be its prohibitions of unfair claim settlement practices. The most important of these at this time is the insurer’s conduct in affirming or denying coverage and their conduct in paying or settling the claim.
Conduct in affirming or denying coverage. When an insured makes a claim, the insurer’s duty is clear. It must not misrepresent a material fact or policy provision relating to the coverage at issue. It must not fail within a reasonable time to either affirm or deny coverage of a claim for, with a claim is under a liability insurance policy, submit a reservation of rights to the policyholder. It must not refuse to pay a claim without conducting a reasonable investigation. And lastly, it must not fail to provide promptly a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer’s denial of the claim.
Conduct in paying or settling the claim. An insurer is required to attempt in good faith to make a prompt, fair and equitable settlement of a claim with respect to which the insurer’s liability has become “reasonably clear.” When there is an ambiguity as to whether the claim falls within the coverage of the policy were is within an exclusion of the policy, the insurer’s liability is not “reasonably clear” and the matter may need to be litigated. There are invalid excuses refusing or delaying settlement efforts. They include failing to attempt, in good faith, a prompt and fair settlement of a claim under one part of a policy in order to influence the claimant to settle another claim under some other part of the policy. And the insurer may not fail to offer or unreasonably delay an offer to settle a claim under first-party coverage because other coverage may be available or because some other third-party is responsible for the damage suffered, unless those matters are specifically set out in the policy as reasons for nonpayment. An insurer also may not delay or refuse to settle a claim under Texas personal auto policy because there is other insurance of a different type available to satisfy all or part of the loss made the basis of the claim.
Legal action is certainly not the most preferred method of having your claim paid. However, it may become a necessity and if you are left with the need to go to court, you may be able to recover actual damages, attorney’s fees, and an additional enhanced recovery of treble damages if the insurer’s conduct was knowing.