BAD FAITH

Under Texas law, insurance companies owe a fiduciary obligation to their insured. This means that insurance companies must exercise the duty of good faith and fair dealing in their relationship with the insured. Failure to do so will give rise to a cause of action commonly known as "Insurance Bad Faith". A cause of action for bad faith usually arises when the insurance company fails to comply with its duties under the insurance code or fails to pay a claim timely. These types of suits only apply to the person who actually purchases the insurance, such as homeowners insurance, and not third parties.
When an Insurance Company violates its duty of good faith and fair dealing, or otherwise violates the Texas Insurance Code it may give rise to a lawsuit on behalf of the insured. In the lawsuit, the insured may be entitled to statutory penalties, treble damages and attorney fees