What Business Owners Should Expect When Insurance Company Lawyers Get Involved in the Claims Process

When a commercial property is damaged, business owners rely on their insurance providers to help cover the associated costs. In certain circumstances, however, insurers will dispute the claim even if covered damages are present. When these disputes occur, it can lead to legal action being pursued by one or both sides. Therefore, business owners should understand what to expect when insurance company lawyers get involved in the claims process.

The Role of the Insurance Company’s Lawyers in the Claims Process

If a commercial property damage claim is disputed, insurance companies will notify their legal counsel to help protect their business interests. These insurance defense lawyers may work for independent law firms or as in-house counsel for an insurance company. Because the insurance industry is so heavily regulated, claims disputes often require legal assistance by counsel who will remain up to date on any handling of potential insurance litigation.

Insurers can also utilize input from legal counsel to determine whether the types of contracts and corporate practices the company is involved in comply with various regulations. As both federal and state laws govern insurance and how industry disputes are handled, some policy stipulations that may be legal in one state, don’t necessarily apply in others.

If a commercial policyholder suffers property damage due to an unforeseen event and that claim is denied by the insurer, insurance companies will often retain a lawyer to represent them. In these instances, the insurer’s legal counsel will evaluate the claim in reference to the policy and state laws to determine whether or not the claim was wrongfully denied. Policyholders must be aware that this methodology is designed to work in the insurance company’s favor to protect their best interests and not those of the insured.

Insurance Adjusters and Legal Defense Counsel

In Texas, when a commercial property suffers damage, the owner(s) will likely file a claim with their insurance company. Once the claim has been filed, the insurer will then send out their own adjuster to assess the damage.

Insurance adjusters are ultimately responsible for determining the value of the property damage. Adjusters will assess the damage to see if it is covered and, if so, how much will be paid. Adjusters’ reports typically include photos and videos of the damage, statements from those directly involved in the claim, and testimony from relevant experts. Insurance adjusters can work directly for an insurance company or be independent public adjusters hired on an ad hoc basis.

According to the Texas Insurance Code, adjusters must be appropriately licensed under Texas law, be over 18 years of age, claim residency in Texas, and complete all necessary training. While lawyers for insurance companies often don’t get involved unless a policyholder’s insurance claim has been delayed, underpaid, or denied to provide defense for the insurer, they can handle a claim in place of an adjuster. It’s important to note, however, that in these instances lawyers cannot render services different than those of a non-lawyer claims adjuster. This is because, according to Section 4102.156 of the Texas Insurance Code, an insurance adjuster cannot render any services or perform acts that constitute the practice of law, such as providing legal advice.

While business owners may feel at ease by having an adjuster assess their claim, in most cases, adjusters rarely help the policyholder. More often than not, insurance adjusters make poor witnesses, draw conclusions not supported by the investigation, and are biased in favor of the insurance company that employs them.

For example, if a business suffers property damage due to a wind and hailstorm, the owner will likely take all the reasonable steps to document the damage and properly file a claim with their insurer. However, even with all the evidence to prove such covered damage had occurred, the insurer could send out adjusters to review the damage who are unqualified or incapable of adequately assessing the damages. Adjusters like these could also grossly delay the claims process for policyholders by taking months to even review the damage, let alone provide a report on their findings. This can quickly lead to a wrongful claim denial due to the poor inspection on the adjuster’s part.

When events like this happen, it can be devastating for commercial property owners who only want to get their businesses back up and running. Despite their continued efforts to undermine valid claims, insurance adjusters can be held liable for their own misconduct, even when acting on behalf of an insurance company. To ensure claims are properly assessed and policyholders aren’t taken advantage of by their insurance company, its legal counsel, or faulty adjusters, they should retain counsel from an insurance coverage law firm.

When to Hire Your Own Legal Counsel for a Commercial Property Damage Claim

When a commercial property owner makes the decision to take legal action against their insurance company by hiring their own counsel, it is often due to the insurer violating the legally binding terms of the insurance policy. Insurance policies are contracts of adhesion that, like all contracts, require both the insurer and the policyholder to meet certain requirements:

• When a policyholder signs the insurance contract, they agree to pay their insurer premiums, maintain the business’s property, monitor the property, pay a deductible when filing a claim, and meet other standards.
• When an insurer signs the insurance contract, the insurer is agreeing to pay the commercial policyholder when a covered loss occurs, compensating them to help restore their business to its pre-loss condition.

If the insurer has not abided by its obligations of the insurance contract, there could be legal consequences. If the insurer denies your claim without just cause, it may be acting in bad faith. In these cases, the insurer is not abiding by the terms of the insurance contract, violating a legally-binding agreement, which could lead to a lawsuit.

The most common reasons commercial property owners decide to take legal action against their insurance provider include:

• Failure to pay on time: In some cases, policyholders may wait weeks or even months for a response from their insurance provider. If the insurance company is taking too long and does not make a reasonable effort to pay out the insured’s legitimate claim, policyholders may want to consult an attorney about potential penalties and interest for acting in bad faith, as outlined by the Texas Prompt Payment of Claims Act.
• Unreasonably low settlement offers: The insured may also make a bad faith claim if the insurer offers an unreasonably low amount of money to settle a claim. If the business requires $100,000 worth of damages, for example, and the insurer is offering $10,000, then a case for breach of contract or unfair claims settlement practices may be necessary.
• Breach of contract: Most lawsuits against insurance companies fall under breach of contract. An insured may sue an insurance company if it fails to follow the terms of the insurance contract, breaches the legal contract, or violates a legal agreement— all of which could lead to a lawsuit.

Commercial Insurance Claim Attorneys

Making the decision to hire legal counsel over a disputed claim with your insurer can seem like a daunting task. At Raizner Slania our firm has a proven track record of representing thousands of clients in claims against most major insurance companies for wrongfully handled commercial property damage claims.

If your business needs help with a commercial property damage claim that has been disputed, delayed, grossly underpaid, or wrongfully denied, we can help.