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Sometimes. Texas treats two complaints differently: that the insurer owed you money under the policy and did not pay, and that it handled your claim wrongfully. USAA Texas Lloyds Co. v. Menchaca decides how those two claims relate.
What cannot wait is your written record. If the claim is against your own insurer, the date it received your final proof of loss starts a statutory clock. Keep every submission and every response, with dates. Talk to a lawyer before you answer a denial letter or give a recorded statement. Call 713-521-0059.
When people say an insurance company treated them badly, they usually mean one of two things. One is that the insurer owed money under the policy and did not pay it. The other is that the insurer did something wrongful in the way it handled the claim.
These are separate claims with separate elements. The relationship between them often decides these cases, and it is the first question to answer about yours.
The controlling decision is USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018). The Texas Supreme Court announced five rules governing how a claim for policy benefits relates to a statutory claim against the insurer. Four are quoted below in the court’s own words, and the fourth is summarized.
The first is the general rule. “an insured cannot recover policy benefits as damages for an insurer’s statutory violation if the policy does not provide the insured a right to receive those benefits.”
The second is the entitled-to-benefits rule. “an insured who establishes a right to receive benefits under the insurance policy can recover those benefits as actual damages under the Insurance Code if the insurer’s statutory violation causes the loss of the benefits.”
The third is the benefits-lost rule. “even if the insured cannot establish a present contractual right to policy benefits, the insured can recover benefits as actual damages under the Insurance Code if the insurer’s statutory violation caused the insured to lose that contractual right.”
The fourth is the independent-injury rule. If an insurer’s statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages for that injury even where the policy does not grant a right to benefits.
The fifth is the no-recovery rule. “an insured cannot recover any damages based on an insurer’s statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.”
There are two. The court announced these rules with a majority, but its application of them to the case before it did not command one. The court remanded for a new trial rather than rendering judgment.
The independent-injury rule is also narrow in practice. The court itself observed that such injuries are rare, and said it had yet to encounter one.
In most cases, the value of a bad-faith theory is tied to whether the policy owed you the benefit. A claim built entirely on how badly the adjuster behaved, with no coverage underneath it, usually fails under the no-recovery rule. A claim where the policy owed the money and the insurer’s conduct caused you to lose it is the one the statute was written for.
That is not a reason to accept bad handling. It is a reason to build the coverage question first and the conduct question second, in that order. Your policy and its endorsements come first, and the adjuster’s letters and your timeline come second.
When the claim is against your own insurer, Subchapter B of Chapter 542 of the Texas Insurance Code, titled Prompt Payment of Claims, puts the clock on the company rather than on you.
Under Section 542.056(a), an insurer must notify a claimant in writing of the acceptance or rejection of a claim. It must do so not later than the 15th business day after it receives all items, statements and forms it required to secure final proof of loss. If it cannot meet that deadline it must say why within the same period. Subsection (d) then gives it until the 45th day after that notice to accept or reject.
Section 542.060(a) provides the consequence. An insurer that is liable for the claim and fails to comply must pay interest on the amount of the claim, in addition to the claim itself. The rate is 18 percent a year as damages. It must also pay reasonable and necessary attorney fees.
One qualification applies. For actions to which Chapter 542A applies, subsection (c) sets a different rate, calculated by adding five percent to the rate determined under Section 304.003 of the Finance Code on the date of judgment.
The date the insurer received your final proof of loss is the date the clock starts, and your own file is the easiest place to prove it.
Put everything in writing, and keep what you send and what comes back. Ask for the denial in writing with the specific policy provisions relied on.
Request a complete certified copy of the policy, including the declarations page and all endorsements. What the adjuster describes and what the policy says are not always the same, and the endorsements are where the difference usually lives.
Record dates as they happen. Delay claims turn on a timeline, and a timeline built after the fact from memory is worth much less than one kept as it happened. A simple log works: the date, who you spoke with, what was asked for, and what you sent.
You generally do not have to give a recorded statement to another party’s insurer. Your own policy may require you to cooperate with your own insurer. Those are different obligations, so it helps to know which one you are being asked to meet.
Every statute and case linked above was read at its primary source. Texas statutes change every legislative session and case law is constantly changing.
This page is general information about Texas law. It is not legal advice about your situation, and reading it does not create an attorney-client relationship.
Most of what decides your claim is on paper. The policy and its endorsements answer the coverage question. The denial letter, the adjuster’s requests and your own log answer the timing and conduct questions. A claim that has all three in order is a claim that can be evaluated quickly.
We start with the policy, because coverage is the question Menchaca puts first. We request the certified policy and the claim file, build the timeline from your records, and check each deadline in Chapter 542 against the dates the insurer received what it asked for.
Schiffer Law Firm is a Houston personal injury firm with 50 plus years of combined experience representing injured people across Texas.
There is no charge to talk, and no attorney’s fee unless there is a recovery.
Written by Jacob Schiffer, Attorney, Schiffer Law Firm. State Bar of Texas No. 24105175.
Call 713-521-0059.
USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018), the opinion on rehearing, which sets out five rules.
Generally no. Under the general rule an insured cannot recover policy benefits as damages for a statutory violation if the policy does not provide a right to those benefits.
A narrow route allowing recovery where the insured suffered an injury independent of the right to benefits. In Menchaca the court said such injuries are rare and that it had yet to encounter one.
Usually the value follows the benefits claim. A claim about the adjuster's conduct, with no coverage underneath it, usually fails under the no-recovery rule.
Under Section 542.056(a), not later than the 15th business day after it receives all items, statements and forms it required to secure final proof of loss. If it gives its reasons in that period, subsection (d) gives it until the 45th day after that notice.
If the insurer is liable for the claim, Section 542.060(a) generally requires interest on the amount of the claim at 18 percent a year as damages, in addition to the claim. It also requires reasonable and necessary attorney fees. For actions to which Chapter 542A applies, subsection (c) sets a different rate.