Can You Sue Your Car Insurance for Bad Faith in Texas?

Can You Sue Your Car Insurance for Bad Faith in Texas?

You paid your premiums every month. You filed your claim after a covered accident. And then your insurance company dragged its feet, lowballed your payout, or denied your claim outright without a real reason. If this sounds familiar, you may be dealing with insurance bad faith — and yes, in Texas, you can sue your car insurance company for it.

Bad faith insurance claims are one of the most powerful tools available to policyholders. Understanding how they work can mean the difference between accepting an unfair settlement and recovering what you are actually owed — plus additional damages.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurer fails to handle your claim honestly, fairly, and promptly. It goes beyond a simple dispute over value. Bad faith means the insurance company deliberately acted against your interests while knowing it had an obligation to help you.

In Texas, insurers are governed by the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA). These laws set clear standards for how insurers must treat policyholders. When a company violates those standards, it can face not just the original claim amount — but additional penalties and attorney's fees.

Common Signs Your Insurer Is Acting in Bad Faith

Not every delayed or denied claim is bad faith, but certain patterns are red flags:

• Unreasonable delays — Texas law requires insurers to acknowledge a claim within 15 days and accept or reject it within 15 business days after receiving all necessary information. Repeated extensions without justification may signal bad faith.
• Lowball offers with no explanation — If the insurer offers far less than repair or replacement costs and cannot support that number, that is a problem.
• Denying your claim without a reason — Every denial must come with a written explanation. Vague or unsupported denials are a warning sign.
• Misrepresenting your policy — If an adjuster tells you something is not covered when it clearly is, that may be a deceptive act under Texas law.
• Failing to investigate properly — Insurers must conduct a reasonable investigation before denying or settling a claim. Skipping steps or ignoring evidence is not acceptable.
• Pressuring you to accept a quick, inadequate settlement — Urgency tactics are designed to close your claim before you know what it is really worth.

If you have experienced any of these, it is worth speaking with an attorney before you accept anything.

What Texas Law Says About Bad Faith Insurance

Texas has some of the strongest policyholder protection laws in the country. Under the Texas Insurance Code Chapter 541, insurers are prohibited from engaging in unfair or deceptive acts. Chapter 542 sets specific deadlines and procedures they must follow.

If an insurer violates these statutes, Texas law allows you to pursue:

• Your actual damages — the full amount your claim was worth
• Up to three times your actual damages if the conduct was knowing or intentional
• Attorney's fees and court costs — which means you may not need money upfront to fight back
• 18% annual interest on overdue claim payments under the Prompt Payment of Claims Act

These remedies exist specifically because the legislature recognized that insurers have significantly more power than individual policyholders. The law levels that playing field.

First-Party vs. Third-Party Bad Faith Claims

Bad faith claims in Texas come in two forms, and the distinction matters:

First-party claims involve your own insurer — for example, your collision coverage, comprehensive coverage, or uninsured motorist coverage. When your own company fails you, this is typically where bad faith applies most directly.

Third-party claims involve the at-fault driver's insurance company. Texas courts have historically been more cautious about allowing bad faith suits against third-party insurers, though violations of the Insurance Code may still provide a path to relief.

Louis Law Group handles both types and will evaluate your specific situation to determine which claims apply.

How to Build a Strong Bad Faith Case

If you believe your insurer acted in bad faith, taking the right steps early protects your case:

1. Document everything. Save every email, letter, and voicemail from your insurer. Write down dates and details of every phone call.
2. Get your own estimate. Do not rely solely on the insurer's adjuster. An independent contractor or public adjuster can give you an objective number.
3. Request your claim file. In Texas, you have the right to a copy. It often reveals what the insurer knew and when — which can be critical evidence.
4. Do not sign a release. Accepting a settlement and signing a release usually ends your ability to pursue additional claims. Do not do this without legal guidance.
5. Contact an attorney early. Bad faith cases have deadlines. The statute of limitations in Texas is generally two years for Insurance Code claims, but waiting can hurt your case.

Louis Law Group offers free case reviews, so you have nothing to lose by getting a professional opinion before making any decisions.

What Compensation Can You Recover?

A successful bad faith claim in Texas can yield significantly more than the original denied or underpaid amount. Depending on the facts, your recovery may include:

• The full value of your original property damage claim
• Consequential damages caused by the delay or denial (such as rental car costs or out-of-pocket repairs)
• Mental anguish damages in certain cases
• Treble (triple) damages if the bad faith was knowing or intentional
• Attorney's fees
• Statutory interest

The goal is to make you whole — and then some, where the law permits.

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If your Texas property damage claim was denied or underpaid, Louis Law Group fights for your full compensation. Call us for a free case review.