Texas Insurance Code § 542.003 – General Rule Against Unfair Claims Handling
Table of Contents
Statutory Text:
Sec. 542.003. UNFAIR CLAIM SETTLEMENT PRACTICES PROHIBITED.
(a) It is an unfair method of competition or unfair or deceptive act or practice in the business of insurance to engage in the following unfair claim settlement practices:
(1) knowingly misrepresenting to a claimant pertinent facts or policy provisions relating to coverage at issue;
(2) failing to acknowledge with reasonable promptness pertinent communications relating to a claim arising under the insurer’s policy;
(3) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under the insurer’s policies;
(4) not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims submitted in which liability has become reasonably clear;
(5) compelling policyholders to institute suits to recover amounts due under the policy by offering substantially less than the amounts ultimately recovered in suits brought by them;
(6) failing to maintain the information required by Section 542.005; or
(7) committing another act the commissioner determines by rule to be an unfair claim settlement practice.
(b) This section does not provide a private cause of action to a claimant.
What Does This Law Mean for Injury Victims?
This statute establishes Texas’s general prohibition against unfair claims handling, particularly by insurers dragging out or denying valid personal injury claims. While it does not allow you to sue directly under § 542.003, it creates the foundation for administrative penalties and supports other legal actions like those under:
§ 541.060 (bad faith)
§ 542.056–.058 (prompt payment rules)
Unfair conduct covered includes:
Refusing to respond to your injury claim
Failing to investigate after an accident
Lowballing or stalling despite clear liability
Misleading you about policy coverage
Example Scenario
You are rear-ended and file a UIM claim under your policy. The insurer knows the driver was uninsured and that your medical records show injuries. But they do not respond for weeks and offer $1,000 to settle a claim clearly worth more. This could violate § 542.003(4) and support further legal action under other statutes.
When This Law Applies
This law applies when:
You file a personal injury claim under your own policy (UM/UIM, PIP, MedPay)
The insurer has clear responsibility but refuses to pay fairly
An adjuster ignores your calls or delays updates
You are pressured into accepting less than your claim is worth
It also applies when insurers lack internal procedures to fairly investigate or settle injury claims.
Related Statutes
§ 541.060 – Unfair Settlement Practices (Bad Faith)
§ 542.056 – 15-Day Deadline to Acknowledge Claims
§ 542.058 – Delay Penalties and Interest
§ 542.051 – Definitions under Prompt Payment Law
Texas Administrative Code Title 28 § 21.203 – Commissioner’s Rules
Texas Case Law Interpreting § 542.003
Established that unreasonable delays in claim response may support liability under related statutes.
Court found insurer’s failure to adopt proper investigation procedures supported unfair practices claim.
Clarified that unfair conduct under § 542.003 can lead to administrative penalties and support bad faith claims.
Frequently Asked Questions About § 542.003
Houston Personal Injury Lawyer - Joel A. Gordon
No. This section does not provide a private right to sue, but violations can support other legal actions and administrative penalties.
Delays, lowball offers, refusal to investigate, or misleading you about coverage, especially when liability is clear.
You can file a complaint with the Texas Department of Insurance and consult a personal injury attorney to explore other statutes like § 541.060.
Violations of § 542.003 help demonstrate bad faith, which can increase your potential compensation and strengthen your case.