When you pay insurance premiums, you expect your insurance company to honor its obligations. However, claim delays, wrongful denials, or underpayments can be frustrating. If this happens, your insurance company may be engaging in bad faith insurance practices — the unfair tactics insurers use to avoid payouts.
This guide will walk you through the process of filing a bad faith insurance claim, from recognizing bad faith practices to taking legal steps against your insurance company. If you're considering legal action, our insurance bad faith attorneys can help protect your rights and fight for the compensation you deserve.
What Is Bad Faith Insurance?
Insurance companies are legally obligated to act in good faith when handling claims. This means they must conduct a fair and timely investigation, communicate honestly, and provide a legitimate reason for denying or delaying a valid claim. When an insurer wrongfully denies, underpays, or unreasonably delays a claim without justification, it may be acting in bad faith.
In Texas, policyholders can take legal action against insurers who fail to properly investigate claims, misrepresent policy terms, or engage in deceptive tactics to avoid paying what is owed. If an insurer is found liable for bad faith practices, the policyholder may be entitled to significant compensation, including damages, legal fees, and in some cases, additional penalties.
Signs Your Insurance Company Is Acting in Bad Faith
Recognizing bad faith is the first step in protecting your rights. If your own insurance company is engaging in unfair tactics, you need to act fast. Here are common signs of bad faith insurance practices:
- Unreasonable delays: The insurer takes an excessive amount of time to investigate or process your claim without justification.
- Denying claims without explanation: Your valid claim is denied without a clear or reasonable basis.
- Lowball settlement offers: The insurer offers far less than what your claim is worth, hoping you’ll accept out of frustration.
- Failure to properly investigate: The insurer ignores key evidence, dismisses expert reports, or fails to assess the full extent of damages.
- Misrepresentation of policy terms: The insurance company provides misleading information about your coverage to avoid paying the claim.
- Excessive documentation requests: The insurer repeatedly asks for unnecessary paperwork, stalling the process and discouraging you from pursuing the claim.
Why does this matter? If an insurance carrier fails to meet its obligations, it’s not just frustrating — it’s a legal violation. Taking action early can help you recover the compensation you’re owed and hold the insurance company accountable for unfair practices.
Filing a Bad Faith Claim Against an Insurance Company
Dealing with an insurance company that delays or denies a valid claim can be frustrating and financially devastating. If you believe your insurer is acting unfairly, taking the right steps can help you fight back and secure the compensation you deserve.
1. Review Your Insurance Policy
Before you do anything, carefully read your insurance policy. It's essential to fully grasp the scope of your coverage, including what is and isn't covered, applicable deadlines, and any exclusions that might apply. If the insurance company misinterprets your insurance policy or wrongfully denies a valid claim, you may have grounds for a bad faith claim.
2. Gather Evidence & Keep Records
Documenting your case is crucial to prove bad faith. Keep a detailed record of all communications with your insurance company. Important evidence includes:
- Emails and letters from the insurer.
- Phone call logs (dates, names, and summaries of discussions).
- Denial letters or written statements from the insurer.
- Medical records, repair estimates, or invoices (depending on the claim type).
- Photos or videos supporting your claim.
Having detailed records will make it easier to escalate the claim — whether through a formal complaint, a demand letter, or even a bad faith lawsuit.
3. Submit a Formal Complaint to Your Insurance Company
Before taking legal action, submit a formal complaint explaining why you believe the insurance company is acting in bad faith. Clearly outline the issue, reference specific terms in your insurance policy, and highlight any unreasonable delays or wrongful denials.
Request a written response within a reasonable timeframe. This gives the insurer a chance to resolve the issue while strengthening your case if further action is needed. If your insurance carrier fails to respond or remains uncooperative, it may be time to escalate your bad faith claim further.
4. Send a Demand Letter
A demand letter formally notifies the insurance company of your intent to take legal action if your bad faith claim isn’t resolved. Clearly outline how the insurer acted in bad faith, referencing delays, wrongful denials, or unfair settlements. Specify the compensation you seek and set a response deadline, typically 15 to 30 days.
This step pressures the insurance carrier to take your claim seriously. Often, a well-documented demand letter prompts the insurer to re-evaluate the claim and offer a fair settlement. If they refuse, the letter strengthens your case for a bad faith lawsuit.
5. File a Complaint with the State Insurance Department
Every state has an insurance department that regulates the insurance industry and handles consumer complaints. Filing a complaint can initiate an investigation into the insurance company's conduct and potentially lead to disciplinary action. In Texas, you can reach out to the Texas Department of Insurance.
While this step can pressure the insurer to act fairly, it does not always guarantee a resolution. If the insurance company remains uncooperative or the issue persists despite state intervention, it may be time to consider legal action and pursue a bad faith lawsuit.
6. Consult Our Bad Faith Insurance Attorney
Consulting with a bad faith insurance attorney is one of the most important steps to take. Legal representation can be beneficial at any stage, but it becomes crucial if your insurer ignores your demand letter, denies your valid claim without explanation, or refuses to offer a fair settlement. An attorney can negotiate on your behalf, gather evidence to prove bad faith, and file a lawsuit if necessary.
Most attorneys work on a contingency fee basis, meaning you pay nothing upfront and only owe legal fees if your case succeeds. Seeking legal help early strengthens your case and improves your chances of a fair resolution.
7. File a Bad Faith Lawsuit with an Insurance Attorney
While legal action against an insurance company can be taken at any stage, it becomes essential when all other efforts — such as formal complaints, demand letters, and negotiations — fail. If the insurance company violated its duty and caused you significant financial harm.
Additionally, if an attorney evaluates your case and determines that you have strong evidence of bad faith, pursuing litigation can improve your chances of securing full compensation. A successful bad faith insurance lawsuit can result in not only payment of your original claim but also additional damages.
What Damages Can You Recover in a Bad Faith Claim?
A successful lawsuit can entitle you to compensation beyond your original claim. Courts recognize the harm caused by bad faith practices, allowing policyholders to recover additional damages.
- Compensatory damages: Covers the full amount of your original claim, reimbursing any out-of-pocket costs due to the insurer’s refusal to pay.
- Punitive damages: Penalizes the insurance company for willful misconduct, discouraging future violations.
- Emotional distress damages: Provides compensation for the stress and hardship caused by wrongful claim denials or delays.
A successful bad faith insurance claim can do more than just restore what you lost — it can also hold the insurance company accountable for its unfair practices and help prevent others from facing similar injustices.
Don’t Wait Too Long to Take Action — Contact Omar Ochoa Law Firm!
If the insurance company denied your personal injury claims and you suspect that there was a sign of bad faith, don’t accept a wrongful denial — fight back. At Omar Ochoa Law Firm, our dedicated Texas bad faith attorneys are ready to stand by your side and protect your rights. We understand the complexities of bad faith insurance law and have a proven track record of success.
Contact us today for a confidential and free consultation. Let us help you pursue the justice and compensation you deserve.
Omar Ochoa has been nationally recognized as one of the best young trial lawyers in the country. He's represented clients in federal and state courts and arbitrations throughout the United States and internationally. He is highly experienced in a wide range of complex litigation and has handled a variety of cases. He has recovered hundreds of millions of dollars for clients of all types — from individuals to mid-sized business owners to multi-national companies.
Table of Contents
Don't Let Your Insurer Get Away with Bad Faith Tactics
If your insurance company is unfairly delaying, denying, or underpaying your claim, you don’t have to accept it. Our bad faith insurance attorneys are here to fight for your rights and secure the compensation you deserve.
Contact UsLorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.
Contact UsIs Your Valid Claim Being Wrongfully Denied? Call Us!
If you believe your insurance company violated your rights by acting in bad faith, you have options. Our team in Texas is ready to help you fight for the compensation you deserve.