What Constitutes the Reasonable Investigation of an Insurance Claim?

In the Texas Insurance Code, Section 541.060(a)(7), insurance carriers are required to pay a claim after reasonably investigating it. An insurer must commence its investigation of a first-party claim within 15 days after the date of receipt of notice of claim. If the insurer believes it has a basis to deny coverage, the carrier must still conduct a reasonable investigation or it may find itself defending bad faith claims. A carrier that underpays a claim because of an inadequate investigation can be held liable for actual damages of at least the amount of the unpaid policy benefits.

Bad Faith Practices That Defy “Reasonable Investigation”

When an insurance company takes unreasonable investigative steps with the underlying motive of denying legitimate claims, they violate their duty to the insured and are liable for bad faith damages. Some unreasonable behaviors commonly undertaken by carriers include:

• Failing to assess the reports or opinions of the contractor or other remediation expert who evaluated the damage.
• Disregarding weather reports that identify wind speed, the presence or size of hail and similar conditions
• Taking inconsistent positions on closely situated or adjacent properties
• Claiming damage was from wear and tear, when it was from a storm event
• Claiming that damage was cosmetic when it was actually functional
• Failing to diligently search for and consider evidence in support of coverage for the claimed loss.
• Failing to give at least as much consideration to the interests of the insured as it gives to its own interests.

Five Rules for When Damages are Recoverable:

1. An insured cannot recover policy benefits for an insurer’s statutory violation if the insured does not already have a right to those benefits under the policy.
2. An insured with established rights to receive benefits under a policy can recover benefits under the Insurance Code if the insurer’s statutory violation causes loss of benefits.
3. An insured can recover benefits as actual damages under the Insurance Code even if the insured has no right to the benefits under the policy if the insurer’s conduct caused the insured to lose that contractual right.
4. If an insurer’s statutory violation causes an injury independent of the loss of policy benefits, the insured may recover damages even if the policy does not grant the insured the right to benefits.
5. An insured cannot recover damages based on an insurer’s statutory violation unless the insured establishes a right to receive benefits under the policy or an injury independent of a right to benefits.

Lawyers For Insurance Claims

Raizner Law has extensive experience with the complex legal issues involved in insurance law, familiarity with insurance companies, and a successful track record in the courtroom. Whether your property suffered a partial or total loss, we will help you fight for compensation and obtain the best possible outcome for your claim. Contact us today to reach an insurance attorney who can help with your damage claim.