When commercial property damage happens, it’s not uncommon for business owners to find comfort in filing a claim with their insurance company. While this should be a seemingly simple process, some insurers choose to utilize bad faith tactics to avoid paying out on valid claims. These methods can be deceitful and hard to detect. Because of this, it’s important commercial policyholders know how to spot bad faith insurance claims practices and know what their options are to remedy the situation.
Bad Faith Insurance Claims
When an insurance company acts in bad faith, it is attempting to abandon its obligations and responsibilities to its clients. Bad faith tactics are typically utilized to financially benefit the insurance company through refusing to pay a policyholder’s legitimate claim or to investigate and process a claim within a reasonable time.
Regardless of how an insurance company presents itself, it is ultimately a for-profit organization that may attempt to avoid paying out on claims whenever possible. Insurance companies turn a profit by collecting insurance premiums and lose money when they have to pay claims. This business structure, unfortunately, encourages some carriers and claims adjusters to engage in bad faith practices for their own financial benefit at the expense of policyholders who pay their premiums.
Insurance policies should contain language that insurers and their representatives will act with “good faith and fair dealing,” which implies that the insurer cannot harm the insured’s rights to receive benefits under their policy. To comply with this promise to act in good faith, the insurer must adhere to certain duties. These duties can include the duty to adequately and accurately communicate with the insured regarding their claim, as well as to follow claim deadlines. An insurer ultimately acts in bad faith when it fails to meet its duties unreasonably and without proper cause.
Some of the most common ways insurance providers act in bad faith include:
Unreasonable Claim Delays and Underpayment
One of the ways insurance companies can act in bad faith is by using methods to delay or slow down the claims process that would lead to a fair settlement. By delaying for as long as possible, an insurer may attempt to persuade the insured to either accept an underpayment of the claim or simply give up on the claim altogether.
The Texas Prompt Payment of Claims Act (TPPCA) imposes a duty on insurance providers to promptly pay claims as soon as it is reasonably clear the damage is covered. Under the TPPCA, insurers must pay claims within 60 days of receiving all necessary items, forms, and statements to make a determination. If found to have acted against its legal obligations, an insurer must pay damages in the form of interest and attorney’s fees, in addition to the amount of the claim. To recover these fees, a policyholder must prove they have a valid claim under their policy, that the insurer is liable for the claim, and that the insurer failed to comply with the TPPCA’s requirements.
Unreasonable Denial of a Claim
While delaying and underpaying valid insurance claims is frustrating enough for policyholders, some insurers may deny coverage altogether in the hope the policyholder will concede. While insurance companies have the right to deny a claim that does not apply to the policyholder’s current policy, they must provide the insured with a reason why and information as to how they reached a decision to deny it. If the carrier does not provide this information and the policy states that the specific type of property damage should be covered, the insurer is acting in bad faith.
Misrepresentation of a Policy
In certain situations, an insurer may attempt to improperly interpret the policy terms, provisions, or requirements for coverage that are not clearly outlined in the policy. This is because insurance providers know they have the upper hand in these situations. After all, policy language can sometimes be unclear or difficult to understand. Misrepresenting the relevant policy to the insured can give rise to a bad faith insurance claim.
Improper Reliance on Policy Exclusions
Commercial property policies often contain exclusions for different types of damage. These exclusions are often worded to encompass a variety of possible scenarios that can result in non-coverage. These can include exclusions for certain flood damage, windstorm damage, and earthquakes depending on the policy. In the event an insurer conducted an unreasonable and inadequate investigation of a commercial property damage claim and concluded the damage sustained was due to an uncovered event when the evidence suggested this was not the case, the insurer was likely engaging in bad faith tactics.
What to Do if An Insurer Acts in Bad Faith
Determining whether or not bad faith conduct has been utilized is important, as it directly impacts the ability of the insured to recover the funds they need in a timely fashion. Commercial property damage claims can directly impact a business’s operation if they are not properly resolved promptly. If an insurer is suspected of acting in bad faith, it is in the best interests of the policyholder to obtain legal counsel to hold the carrier accountable and ensure valid claims are paid.
Commercial Insurance Coverage Attorneys
Commercial property damage can be devastating and put an undue amount of stress on business owners. When an insurance provider chooses to act in bad faith and not honor its obligations under a policy, it only exacerbarbates this stress. At Raizner Slania, we have successfully handled bad faith claims against some of the largest insurance companies in the world and can help commercial policyholders get back on their feet. If you are dealing with an insurance company that has wrongfully delayed, underpaid, or denied your valid property damage claim, we can help. Contact our office today to see how we can assist you.