Insurance companies owe a wide range of duties to their policyholders when a claim has been filed. Insurers are responsible for ensuring claims are promptly adjusted and settled fairly. Despite this, some insurance carriers may breach these duties at the expense of the policyholder. In these unfortunate instances, it is often in the best interests of the insured to pursue legal action against their insurance provider for their bad faith actions. If successful, the policyholder may be entitled to certain damages that can be recoverable in a bad faith insurance case.
Signs an Insurance Carrier is Acting in Bad Faith
When a Texas business owner suffers damage to or loss of property due to an unforeseen event, one of the first and most important things to do is file a commercial property insurance claim. Once the insurer receives the claim, they owe the insured the common law and statutory duty of good faith and fair dealing, along with an obligation to pay claims within a timely manner, as codified in Chapter 541 and Chapter 542 of the Texas Insurance Code. This is especially important, as insurers are required by law to treat their policyholders fairly, due to the inherent advantage carriers have over their insureds. If this legal responsibility is violated, the insurer may be found to be acting in bad faith. When an insurer acts in bad faith, policyholders can file a lawsuit to recover what they are rightfully owed under their policy.
Bad faith is a term often used when one suspects their insurer is attempting to thwart the claims process. By acting in bad faith, the insurance company is effectively abandoning its contractual obligations to its insured. These tactics are used to financially benefit the insurer by saving it money via avoiding claims payments.
It’s important that commercial policyholders remember their insurers are for-profit businesses and no matter how a company presents itself, it will ultimately work for its own benefit and attempt to avoid paying out valid claims whenever possible. This is because insurers make money by collecting insurance premiums and lose money when they must pay claims. Unfortunately, this business structure encourages some insurers and claims adjusters to engage in bad faith practices.
While sometimes it may be difficult to know for sure whether an insurance company is acting in bad faith, there are certain signs policyholders can look for. Some of the signs a commercial insurance company may be acting in bad faith include:
Lack of Communication
No matter the insurance company, once a property damage claim has been filed, insurers know that timing and communication are paramount. In Texas, there are statutory periods by which an insurer must acknowledge a claim, begin investigating, decide on a claim, and pay out an accepted claim. Therefore, it can be incredibly frustrating when the insured cannot reach them. When this happens, there’s a good chance they are giving the policyholder the runaround. Lack of communication is an alarming sign that could indicate an insurance company is acting in bad faith hoping the policyholder will simply give up on the claim altogether.
After property damage has occurred, insurers will want to obtain all documentation about the condition of the property before the event, after the damage was caused, as well as any receipts from repairs, and any estimates as to the value of the compromised property inside and outside of the premises. However, if the carrier’s demands seem unreasonable, it could be cause for concern. If the policyholder is asked for documentation that is unrelated to the claim or is asked to resubmit the same information multiple times, then the insurer may be attempting to make the claims process much more difficult.
Lowball Settlement Offers
Because insurance companies are in business to make money, it’s no surprise their goal is to pay out as little as possible on valid claims. If a policyholder suspects their insurance company is pressuring them to accept a settlement that is incredibly low or unfair, it could be an indication of bad faith activity.
Business expenses don’t just stop once a property has been damaged to the point that it is inoperable. Everything from payroll to rent and other ongoing expenses will continue to accrue over time, making it important for claims to be paid promptly. If the insurer becomes unresponsive or is incredibly slow in its claim investigation, the insurance company may be attempting to delay payment.
Denied Claims Without Explanation
While an insurance provider has the right to deny claims for damage not covered under the policy or that do not meet the proper criteria outlined in the policy, the insurer must always explain why a claim was rejected. If the carrier does not provide reasoning as to why the claim denial occurred, it may be failing to follow protocol—a sign of bad faith.
Insurers can sometimes threaten insureds as a means to coerce them into accepting a lowball settlement or even a claim denial. For instance, insurers can tell policyholders they’ll face higher premiums, threaten to cancel a policy, or insist the insured will experience other consequences if they do not settle a claim – but, all of those are considered bad faith actions.
Types of Damages Recoverable in a Bad Faith Insurance Lawsuit
Once it has become clear that a commercial policyholder’s insurance carrier could be acting in bad faith, it is often in the best interest of the policyholder to file a bad faith insurance lawsuit. If the policyholder is successful and able to legally establish that the insurance provider was acting in bad faith, they are likely entitled to certain damages that can be recovered. The different types of damages that can be recoverable in a bad faith insurance lawsuit include:
Up to three times the amount the insurance company would have paid if it had processed the policyholder’s claim properly if the policyholder can prove an intentional or knowing violation
Attorneys’ fees, interest, and court costs
Statutory penalties in the form of interest for delayed payments
Punitive damages to punish the insurance company for its bad behavior
Why You Should Hire a Bad Faith Insurance Claim Attorney
While it can seem like a daunting task, hiring a bad faith insurance attorney can be incredibly beneficial to policyholders. While the insurance company is ultimately responsible for upholding its end of the contract, other parties involved – such as the adjuster sent by the insurance company – know how to manipulate claims. This is particularly notable, as adjusters are supposed to be unbiased individuals with no stake in the claim whatsoever. However, in most cases, adjusters are more likely to work for the benefit of the insurance company and not the policyholder. A seasoned bad faith insurance claim attorney will be familiar with the methods used by not only the insurance company but its representatives as well. Hiring an attorney in these instances can help level the playing field for policyholders who may be intimidated by their insurer to accept a suboptimal claims outcome when they shouldn’t.
An attorney will also handle most, if not all, of the correspondence with the insurer. This is important, as insurance law is particularly complex and nuanced, making it incredibly easy for minor mistakes to be made early on by policyholders who may not fully understand their rights and responsibilities under a commercial insurance policy. Attorneys who focus their practices on bad faith insurance cases know how insurers manipulate the rules for their own benefit. An insurance company may make filing a claim seem like much more of a hassle than repairing the damage out of pocket. These and other methods can make policyholders feel overwhelmed and tempted to simply give up on a claim altogether. Having an attorney who has seen and experienced these and other bad faith measures can help protect policyholders from being taken advantage of by a large corporation. By obtaining the proper representation, policyholders can ensure they have someone by their side who will fight relentlessly to get them what they are rightfully owed.
Commercial Property Insurance Claim Attorneys
Even with the proper coverage in place and taking the right steps in filing a valid insurance claim for property damage, insurance companies can still choose to take advantage of policyholders through bad faith actions. In these cases, insurers will often attempt to delay the payment of a valid claim, grossly underpay a claim, or simply deny it altogether with no explanation.
At Raizner Slania, our team of commercial property insurance claim attorneys has successfully handled claims against nearly every major insurer concerning the use of bad faith tactics. Having a lawyer who has experienced litigating against an insurance company acting in bad faith can help protect policyholders from being taken advantage of in their time of need. If you have filed a claim for commercial property damage and you believe your insurer may be acting in bad faith, we can help you recover what you are rightfully owed.