Any instance of property damage can be overwhelming, especially for business owners whose livelihoods may be at stake. Property damage can quickly disrupt operations and create a significant financial burden.
While having an up-to-date insurance policy in place can provide some relief, insurance providers often wrongfully deny, severely underpay, or delay perfectly valid claims for their own benefit. These and other actions constitute acting in bad faith. Such tactics can make an already stressful situation nearly impossible to navigate without legal counsel.
At Raizner Slania, our attorneys have decades of experience handling bad-faith claims against the largest insurance companies in the world. When faced with the possibility that an insurer is acting in bad faith, policyholders must know what type of proof is needed to substantiate such claims and obtain the compensation they are rightfully owed and get back to business.
When an Insurance Company Acts in Bad Faith
A commercial property policy serves as a safety net for business owners when covered damage occurs. While having a policy can provide comfort, insurance companies are often unwilling to promptly investigate and resolve claims. Such inactions can quickly lead to improper claim denials or significant underpayment, both of which may form the basis of a bad faith claim.
A bad faith insurance claim occurs when an insurer does not act fairly or appropriately in processing a claim, violates the law, or fails to uphold its obligations under the insurance policy. If an insurer engages in such behavior, the policyholder may recover compensation for the resulting damages.
When an insurance provider acts in bad faith, it is usually attempting to avoid its legal obligations to policyholders for financial gain. As for-profit businesses, insurance companies make money by collecting premiums and lose money when paying claims. This structure can incentivize carriers and their adjusters to act in bad faith at the expense of policyholders.
These bad faith behaviors can be particularly damaging, as when a policyholder enters into a contract with an insurer, there is an implied covenant of good faith and fair dealing. This means it is known that the parties to the contract will act in good faith and behave reasonably when fulfilling the terms of the agreement.
Insurance policies are legally binding contracts, in which insurers have several duties to their policyholders that must be upheld, including:
- A duty to investigate claims properly
- A duty to defend the policyholder
- A duty to pay settlements or court-ordered damages when a covered claim is made
- A duty to settle if a reasonable settlement exists and to protect the insured from out-of-pocket losses from a lawsuit
If an insurer fails to uphold these obligations, it may violate its duty of good faith and fair dealing, which can lead to a bad faith insurance claim.
Common Ways Insurance Providers Act in Bad Faith
There are many ways insurers may act in bad faith. Some of the most common types of misconduct that result in a bad faith claim include:
- Denying a valid claim without proper justification
- Making an unreasonably low settlement offer without justification
- Misrepresenting a material fact or policy provision relating to coverage
- Delaying the investigation or payment of a claim
- Engaging in intimidation tactics
- Refusing to investigate a claim without justification
- Conducting a claims investigation with no real resolution
- Refusing to consider any documented evidence involved in a claim
- Refusing to settle a claim when liability is reasonably clear
- Failing to affirm or deny coverage with the policyholder
- Enforcing a full and final release of a claim from a policyholder when only a partial payment has been made
- Engaging in false or misleading advertising
Proving an Insurance Provider Has Acted in Bad Faith
Proving an insurer has acted in bad faith can be difficult, but it’s not impossible. One of the first things policyholders should do in these situations is obtain legal counsel.
Insurance policies are nuanced in their language, and the laws surrounding them are also incredibly complex. An experienced insurance claims attorney can help navigate the various obstacles they may face along the way to obtaining proper claims payment and any other damages owed.
Ultimately, the burden of proving a carrier acted in bad faith falls on the insured. In Texas, there are two ways bad faith can be demonstrated:
- Common Law Bad Faith Claims: These claims require a policyholder to show proof that an insurance company denied a claim despite liability being reasonably clear.
- Statutory Bad Faith Claims: These claims require the policyholder or their attorney to show proof the insurance company acted in a way that was strictly prohibited under Chapter 541 and/or 542 of the Texas Insurance Code.
Damages That May Be Awarded in Bad Faith Cases
Policyholders who can make a successful bad faith claim against their insurer may be entitled to certain legal damages. The specifics of the damage award often depend on several factors, such as state laws, standard law rules, the nature of the insurer’s misconduct, and the actual types of losses the policyholder experienced.
Generally, Texas policyholders are entitled to the following damages if their insurer is found to have acted in bad faith:
- Any financial reimbursement the insurance company was supposed to pay out in the first place
- Any actual financial losses from the insurer’s bad faith refusal to process the claim in a timely and efficient manner
- Court costs and attorney’s fees are necessary to hold the insurer accountable
- Punitive damages to punish the insurer for misconduct
- Statutory penalties imposed by legislation prohibiting unfair claims practices
- Interest on insurance money that was improperly withheld
- Damages for emotional distress
Every bad faith claim is unique, so what can be recovered can vary; however, the law is designed to ensure policyholders are not left with the burden of their insurance carrier’s bad actions.
Commercial Insurance Claims Attorneys
The use of bad faith tactics by insurance providers puts policyholders in an even worse position, as they are already dealing with property damage. The additional financial burden can make it nearly impossible for affected businesses to recover, potentially forcing them to shut their doors permanently or incur additional relocation costs.
At Raizner Slania, our insurance coverage attorneys are uniquely prepared to fight on your behalf to recover the money you deserve. We have obtained a reputation for delivering successful results for our clients and holding big business accountable for its actions. If you are a commercial policyholder dealing with an insurance company that has acted in bad faith by wrongfully delaying, underpaying, or denying your valid property damage claim, we can help.