Dealing with any sort of commercial property damage can be overwhelming. However, even after a valid insurance claim has been filed and investigated, it can still be denied, underpaid, or delayed by the insurance company. When insurance companies employ bad faith tactics, they must be held legally accountable for their actions. Obtaining proof is incredibly important in policyholders achieving a favorable outcome.
Insurance Providers and Bad Faith Claims
Commercial property insurance serves as a safety net for business owners should their property be damaged by a covered event. While this can provide a great deal of comfort when disaster strikes, property owners may find their insurer is unwilling to promptly and effectively investigate the claim, denies the claim, or grossly underpays the claim, it is likely the carrier is acting in bad faith.
Insurance companies that act in bad faith are attempting to abandon their legal obligations and responsibilities to their clients. These tactics are used to financially benefit the insurer by saving it money through avoiding claims payments.
One of the main reasons this occurs is simply due to the business structure of insurance providers. Insurance companies are for-profit organizations that may attempt to avoid paying claims whenever they have an opportunity. Insurance carriers essentially make money by collecting insurance premiums and lose money when paying claims. This ultimately encourages some carriers and claims adjusters to engage in bad faith practices at the expense of their policyholders.
An insurer may be acting in bad faith if they:
- Delay a claim without explanation
- Don’t acknowledge receipt of a claim
- Stall the investigation of a claim
- Attempt to settle a claim for significantly less than it’s worth
- Issue a payment without explaining what it’s for
- Use the failure to submit forms as a reason for denial without requesting them
- Ask for unnecessary documentation or multiple forms with the same information
- Accuse the policyholder of misbehavior or criminal activity related to the damage
- Advise the policyholder not to hire an attorney
- Refuse to pay for contractors or work that was previously approved
Proving an Insurance Company Acted in Bad Faith
If a commercial policyholder suspects their insurance company is acting in bad faith, one of the first things they should do is obtain legal counsel. Not only are insurance policies heavily nuanced in their language, but insurance laws are also incredibly complex. An experienced insurance coverage attorney can help an insured navigate the obstacles they may face along the way to obtaining the claims payment and other damages they are owed. But how can a policyholder prove an insurance company acted in bad faith?
Ultimately, the burden of proving a carrier acted in bad faith falls on the insured. In Texas, there are two ways to prove bad faith: common law bad faith claims and statutory bad faith claims. Common law bad faith claims require a policyholder to show proof that an insurance company denied a claim even though liability was reasonably clear. Only a policyholder can pursue a common law bad faith claim. Statutory bad faith claims, on the other hand, are much more common. These require the policyholder or their attorney to show proof that the insurance company acted in a way that was strictly prohibited under Chapter 541 and/or 542 of the Texas Insurance Code. These chapters are especially important as they explicitly forbid insurance companies from engaging in unfair and/or deceptive acts or practices.
The bad faith practices most commonly engaged in insurance providers include:
- Misrepresenting a material fact or policy provision relating to coverage
- Failing to attempt to make a fair settlement when liability is reasonably clear
- Failing to act in good faith to reach a timely settlement
- Failing to provide a reasonable explanation for the denial of a claim
- Failing to affirm or deny coverage with the insured
- Failing to explain the reason for a compromised settlement offer
- Failing to respond to claim requests within a reasonable period
- Denying or refusing to pay a claim without conducting a reasonable investigation
- Enforcing a full and final release of a claim from a policyholder when only a partial payment has been made
- Falsely advertising (such as misleading the public or misrepresenting the services offered by the insurance company)
Insurance Coverage Attorneys
The use of bad faith tactics by insurance providers ultimately puts policyholders in a much worse position while they already have to deal with property damage. At Raizner Slania, our insurance coverage attorneys have successfully handled bad faith claims against some of the largest insurers in the world. If you are a commercial policyholder dealing with an insurance company that has wrongfully delayed, underpaid, or denied your valid property damage claim, we can help. Contact our office today for more information.
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