What is the difference between an insurer's liability for bad faith and breach of contract in insurance litigation cases?
Insurance litigation law in Texas is complex and involves a variety of different claims and legal defenses. One of the main differences between an insurer’s liability for bad faith and breach of contract in insurance litigation cases is that bad faith is a tort claim, while breach of contract is a traditional breach of contract claim. In tort cases, the claimant must show that the insurer acted in bad faith in handling or rejecting their claim, while in a breach of contract case, the claimant must show that the insurer breached their contractual obligations. A successful bad faith claim may result in compensatory damages, such as payment for the value of the claim, as well as punitive damages, which serve as punishment for the insurer’s bad faith. A breach of contract claim may also result in compensatory damages, such as payment for the value of the claim, as well as attorney’s fees. Another difference between bad faith and breach of contract claims is that a claim of bad faith does not require a breach of contract to be proven. To win a bad faith claim, a claimant must show that the insurer acted unreasonably in handling or rejecting their claim. To win a breach of contract claim, however, the claimant must show that the insurer breached a specific term of the insurance contract. In summary, the main difference between an insurer’s liability for bad faith and breach of contract in insurance litigation cases is that bad faith is a tort claim while breach of contract is a traditional breach of contract claim. Bad faith claims are more likely to result in punitive damages, while breach of contract claims are more likely to result in attorney’s fees. Additionally, bad faith claims do not require a breach of contract to be proven, while breach of contract claims do.
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