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There are two different things people mean when they say an insurance company treated them badly, and Texas law treats them very differently.
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, and the relationship between them decides most of these cases.
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. In the court’s own words:
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 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 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 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 if the insured has no right to receive policy benefits.”
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.”
Two notes about Menchaca. The court announced these rules with a majority, but its application of them to the case before it did not command one, and the court remanded for a new trial rather than rendering judgment. And the independent-injury rule is narrow in practice; the court itself observed that such injuries are rare, and courts have rejected most attempts to plead one.
The practical translation is this. In most cases, the value of a bad-faith theory is tied to whether the policy actually owed 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.
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.
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. 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.
Do not give a recorded statement to another driver’s insurer without advice. Your own policy may require your cooperation with your own carrier; that is a different obligation from the one the other side’s adjuster is asking you to accept.
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 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, and subsection (d) then gives it until the 45th day after that notice to accept or reject.
Section 542.060(a) is what gives those deadlines teeth. An insurer that fails to comply must pay interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney fees. One qualification worth stating plainly: 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.
Keep every submission and every request in writing. The date the insurer received your final proof of loss is the date the clock starts, and it is far easier to prove from your own file than from theirs.
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. Courts have rejected most attempts to plead one.
Usually the value follows the benefits claim.
