Nearly everyone has some kind of insurance policy. Whether it’s coverage for your car, home, business, or yourself, insurance policies give us peace of mind knowing that if anything happens, we won’t be left in the dark and coming out of pocket financially. Insurance is a good thing, but only if insurance companies play by the rules. Unfortunately, many insurance companies utilize bad faith tactics to avoid paying out on claims. Read below to learn more about common bad faith tactics used by insurance companies to delay, underpay, or deny valid claims submitted by policyholders.
Why Insurance Companies Engage in Bad Faith Behaviors
Despite what they may claim, insurance companies are businesses first – and they are in business to make money. This means they put their own profits before their policyholders’ claims payouts. Insurance companies have no incentive to pay out on large claims; so, don’t be fooled by their slogans about putting customers first. Additionally, insurance companies make money by collecting premium payments and lose money when paying out on claims. When any type of loss occurs, insurance companies often try to minimize the claim or find ways to completely deny claims by employing bad faith tactics.
The ultimate motivation behind an insurance carrier acting in bad faith is financial. The insurer likely hopes its delaying or denying of a claim will make a claimant give up, saving the insurance company money instead of making a payout.
What Bad Faith Tactics Should Policyholders Watch Out For?
Bad faith can either be intentional or occur as the result of professional negligence. The bad faith insurance lawyers at Feldman & Feldman have helped many policyholders get the compensation they are entitled to under their policies and even additional damages when available. The Texas Insurance Code Chapter 542 details unfair claim settlement practices under Texas law. Through decades of successful litigation experience, we have identified the following common bad faith tactics used by insurance companies when adjusting claims:
- They claim property damage is due to “normal wear and tear.” Property insurance policies do not cover normal wear and tear that occurs over time. Sometimes insurance companies will wrongfully assert property damage caused by a covered event is actually due to normal wear and tear, and thus not covered under the policy.
- Damage is caused by inadequate maintenance. All buildings require regular maintenance. Most policies do not cover damages caused by the owner or occupier’s failure to conduct adequate maintenance. Insurance companies try to avoid paying out on claims by claiming property damage is caused by a lack of proper maintenance.
- Misrepresenting the policy. Oftentimes, insurance companies will completely and blatantly misrepresent policy terms to their policyholders. They might wrongfully claim certain damage isn’t covered, when in fact it is.
- Undervaluing claims below the deductible. Some insurance companies will accept certain damages but value the damages at less than the policy deductible so the insurer doesn’t have to pay anything.
- Causing unnecessary delays. Insurance companies often drag out claims for months. This puts a serious strain on policyholders. When an insurer asks for the same documentation or forms multiple times or fails to send out an adjuster timely to review the damage, the company is engaging in bad faith behavior by unnecessarily prolonging the claims process.
- Not communicating with the insured. Many victims of bad faith insurance tactics report insurance companies do not timely return phone calls, emails, or other forms of communication, leaving policyholders in the dark about the status of their claims. Under Texas law, an insurer must, for example, acknowledge with reasonable promptness pertinent communications relating to a claim arising under its policy.
- Unreasonable settlement offers. Many insurers pressure policyholders to accept settlement offers that are far too low to cover the loss suffered. If the carrier tries to convince the insured there is no other option or tries to persuade them that their policy won’t cover more, the insurer may be acting in bad faith in violation of the law.
- Denying a claim without giving a reason. Some insurers will quickly deny a valid claim without giving a reason for the denial. If an insurance company fails to investigate a claim and denies it without a stated reason, it may be acting in bad faith.
Houston Bad Faith Insurance Lawyers
Insurance companies count on policyholders being unaware of their rights. All policyholders have the right to a prompt, fair, and equitable settlement of a claim. Insurance carriers act in bad faith any time they fail to uphold or deliberately neglect a fiduciary duty to a policyholder. When insurance companies violate these rights, policyholders will need an experienced Houston bad faith insurance lawyer by their side. At Feldman & Feldman, we help policyholders protect their rights and get the compensation they are rightfully owed under their insurance policies from insurance companies acting in bad faith.