Texas insurance law holds carriers to a duty of good faith and fair dealing. When they violate it, the Texas Insurance Code allows policyholders to recover treble damages plus attorney fees.
The two key chapters
- Chapter 541 — Unfair Settlement Practices Act
- Chapter 542 — Prompt Payment of Claims Act
Common bad-faith conduct
- Refusing to investigate a claim
- Misrepresenting policy provisions
- Failing to settle within policy limits when liability is clear
- Demanding unreasonable documentation
- Delaying payment past the statutory deadlines
- Lowball settlement offers unsupported by evidence
Statutory deadlines under Chapter 542
- Acknowledge claim: 15 days
- Request information: 15 days
- Accept or reject claim: 15 business days after receiving info
- Pay accepted claim: 5 business days
Penalties for violation
Late payment carries 18% annual interest plus reasonable attorney fees. Chapter 541 violations can yield treble damages plus fees in egregious cases.
How to document bad faith
- Keep every email, letter, and recorded call (Texas is one-party consent)
- Log every phone contact with date, time, and adjuster name
- Get every coverage decision in writing
- Save denial letters with stated reasons
When to involve TDI or a lawyer
File a TDI complaint at any time — it's free and often resolves delays. For denied claims with real value, consult a Texas insurance bad faith attorney. Many take cases on contingency.
Frequently asked questions
Can I sue my insurance company for bad faith in Texas?
Yes. Texas Insurance Code Chapters 541 and 542 give policyholders the right to sue for unfair settlement practices and late payment.
What is the deadline for an insurer to pay a Texas auto claim?
Generally 15 business days to accept or reject, plus 5 business days to pay an accepted claim.
This article is for general information only and is not legal or tax advice. For guidance specific to your situation, talk to a licensed Texas insurance agent. Ready to put it into practice? Get a free quote or request a policy review.