What Is Common Law Bad Faith?

When your insurance company wrongfully denies a claim, you may need to seek legal representation to help you recover. Your attorney may bring one of two types of bad faith claims against your insurer depending on the circumstances: a common law claim for bad faith or a statutory claim. Common law refers to the law created by case law. In contrast, statutory claims arise from statutes or regulations. While a statutory claim is commonplace, little is known about the history and limitations of the common law for bad faith.

History Behind Common Law Bad Faith

In Texas, the common law claim for bad faith is a relatively new kind of claim. The nascent stage of the claim involved a 1983 decision by the Texas Supreme Court where the court recognized a covenant of good faith and fair dealing between an insurer and the insured in English v. Fischer. This covenant stemmed from the belief that there is a special relationship between the insurer and the insured because of the disparity in the bargaining power between the two.

Today, while the claim for common law bad faith still exists, it does have a number of large limitations in place to encourage parties to rely on the statutory provisions instead. For example, claims can only be brought for first-party policyholders. In other words, only the policyholder can bring a claim against his or her insurance company, not a third party. In addition, in State Farm v. Simmons, the Texas Supreme Court also held that the policyholder must be able to show that the insurance company denied or delayed the payment of a claim when it knew, or should have known, its liability on the claim was reasonably clear. Thus, while a common law claim for bad faith may still be viable, more often than not, attorneys tend to prefer the statutory option.

Contact Us For Help

There is no need to be cheated out of a just claim because of deceptive tricks of the insurance trade. With nearly 30 years of experience going to the mat on behalf of damage victims who battle insurance companies, our attorneys will not hesitate to file an insurance bad faith lawsuit, if necessary, in pursuit of the claim that you deserve. Our experience and expertise will start working for you as soon as possible at no charge. For a free consultation, either use our contact form or call us at 713-352-7883 or 877-643-3099 toll free.