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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. |
