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Overview of how bad faith insurance works in Texas

Property Owners Associations, or POAs, are an important of Houston’s economic life. Whether they are involved in a residential neighborhood or with a commercial complex, they play an important role in maintaining properties and the surrounding areas.

Not surprisingly, POAs have to rely heavily on insurance companies to protect them in the event of a loss. In addition to the possibility of property damage, POAs can also be involved in lawsuits which may require them to pay out hefty sums both in losses and expenses.

It can be at best frustrating, and at worst economically devastating, when a POA’s insurance company does not pull through for them and pay a valid claim. After all, POAs pay expensive premiums for this protection.

The law of bad faith offers additional protection to POAs

Unfortunately, too many insurance carriers are well aware of their superior bargaining position and use it to force customers into accepting less from their insurance company than they really should.

Many times, a company will play hardball with a POA because they know that, at the end of the day, the most they will have to pay is the policy’s limits.

Texas has several so-called bad faith laws on the books that serve to even the playing field between a POA and its insurance carriers.

Under Texas law, insurance carriers must adhere to several standards with respect to how they handle claims.

The statutes themselves are detailed, but the basic idea is that insurance companies have to investigate claims reasonably and promptly.

Insurance companies may not deny claims or delay payment as part of a bargaining strategy. They must always have a valid reason for making such decisions.  If an insurance company acts otherwise, it may be open to an accusation of bad faith.

If a POA feels that an insurance carrier has acted in bad faith, it may be able to recover additional compensation above and beyond the policy’s limits.