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The Texas Supreme Court has issued a decision setting forth five rules about statutory bad faith under the state's Insurance Code.

After Hurricane Ike struck Galveston Island in September 2008, Gail Menchaca contacted her homeowner's insurance company, USAA Texas Lloyds Co., and reported that the storm had damaged her home. USAA sent an adjuster to investigate Ms. Menchaca's claim, and the adjuster found only minimal damage.

Repair costs didn't exceed policy's deductible

Based on the adjuster's findings, USAA determined that its policy covered some of the damage but declined to pay Ms. Menchaca any benefits because the total estimated repair costs did not exceed the policy's deductible.