Bad Faith Insurance Claims
An insurance company should act in good faith and fair dealing with its policyholders. If your insurer acts in bad faith with regard to your valid insurance claim, you may need the counsel of an insurance coverage attorney specifically experienced in fighting insurance companies who delay, underpay, and/or deny property insurance claims.
Bad faith insurance is a claim that a policyholder has against their insurance company for its unlawful claims handling practices.
A first party insurance claim occurs when a policyholder seeks recovery for their own losses from their own insurance provider. When you file an insurance claim with your insurance company, this is a first party claim. An example of a first party claim is when your roof is damaged by hail and you file a claim against your homeowner’s insurance policy. If the carrier rejects the claim without doing a thorough investigation, you may be able to work with a bad faith insurance attorney to seek the compensation you are due along with additional potential damages.
Examples of Bad Faith Claims
There are countless ways an insurance company can act in bad faith when processing a policyholder’s claim. Often, the insurer fails to follow the appropriate procedures for claims handling in violation of state law. This unethical behavior is designed to keep money in the pockets of insurers at the expense of policyholders who rightfully pay their premiums and it leaves policyholders in an unfair position.
Examples of insurance company bad faith practices can include:
- Unreasonable delays in payment, response, or conclusion without any explanation
- Failing to acknowledge receipt of a claim
- Failing to conduct a thorough investigation of a claim
- Misrepresenting the value of a claim
- Withholding any information about a claim
- Failing to explain why a claim was denied
- Making payments without explaining what the payments mean
- Trying to settle a claim for less than a reasonable or fair amount
A few other key giveaways that an insurance carrier is acting in bad faith occur when representatives use any threatening words or discourage policyholders against making a claim. The insurer may also advise a claimant to not hire an attorney. This should never happen, as it is often a sign the insurance company is aware of its own mistakes in claims handling.
What should I do if my home Insurance Claim is denied?
If you feel your claim was unfairly denied, the process moving forward can vary according to the terms of your insurance policy. Most policies allow at least one appeal to the insurance company. You can work with a lawyer to file this appeal or try it on your own. If the appeals process fails, the next step would be to contact a Houston insurance claims lawyer to discuss pursuing a lawsuit in civil court against your insurance carrier or engaging in the alternative dispute resolution process, which is mandatory in some cases.
Texas Bad Faith Insurance Laws
All insurance companies, though it may not be explicitly written in your policy, are required to uphold a duty of good faith and fair dealing with their policyholders. To succeed on a bad faith claim, the insured must provide proof of the absence of reasonable basis for denying the claim or delaying payment for the claim. There are two causes of action a policyholder can pursue to recover financial compensation for a bad faith insurance claim: a common law bad faith claim and/or a statutory bad faith claim.
Common law bad faith claims require the policyholder to show their insurance company denied a property damage claim even though the damage was covered. The Texas Supreme Court has upheld the viability of a common law claim for bad faith despite the state having statutes prohibiting insurers from engaging in designated actions that would give rise to specific penalties.
You can make a multitude of allegations in a statutory bad faith claim under Chapter 541 of the Texas Insurance Code, including misrepresentation of a policy provision, failing to reasonably explain why a claim was denied, failing to affirm or deny coverage within a reasonable time, and canceling or changing policy terms after a claim is made.