Insurance Disputes

Insurance Disputes

An insurance transaction can be divided into the following components: sale of the policy, underwriting, policy administration, and claims. First party insurance disputes can occur in any part of an insurance transaction. The nature of disputes can vary, and often depend on the phase of the insurance transaction in which they arise.

Sale of Policy
Disputes can occur between the insured and an insurer over representations made at the time of the sale of an insurance policy. Disputes can involve differences in opinion between what the insurer asked for and what they were sold, or what was represented to them. Insurance disputes may also arise over the timeliness of an insurer or agent in providing coverage.

Underwriting
In the underwriting process an insurer considers the risk involved in providing coverage. The underwriting process is by its nature an inherently discriminatory process. The discrimination can be perfectly legitimate when it is based on certain risk factors. But when insurance companies or their agents discriminate based on some factors such as ethnicity, gender, or disability they are breaking the law and they can be held liable for injury to the applicant.

Policy Administration
Disputes can arise over how an insurance policy is administered. Such disputes may result when an insured party is charged a higher premium than promised. Insurance disputes may also arise over the insurer's cancellation policy when the insured decides to cancel an insurance policy.

Claims
When insurance claims are made by the insured, there may be disagreement over the scope of coverage, the amount of payment, and missed or late payments by the insured. Disagreement may also occur over the amount of coverage represented by the insurer or its agent at the time of the sale of the policy, and the amount of coverage provided by the insurer when a claim is made.

Insurance Lawsuits

An insured party can bring a lawsuit against their insurance company for breach of contract, misrepresentation, nondisclosures, unfair settlement practices, or other misconduct.

Breach of Contract
An insurance policy is a contract between an insured party and an insurance company. The policy spells out the obligations of both the insurer and the insured. When either party fails to fulfill their obligations under the policy, they are in breach of contract. When an insurance company does not fulfill their contractual obligations under the policy, the insured party can sue them for breach of contract. An insured party seeking to recover damages under an insurance contract must be able to prove the following:

• the insurance contract existed and was in force at the time of the loss;
• the insured party was in compliance with the terms of the insurance contract;
• the insurer has breached the terms of the insurance contract.

Under a breach of contract lawsuit, the insured may recover the policy benefits they are entitled to. The insured may also be entitled to recover foreseeable consequential damages that result from the insurer's breach of contract.

Misrepresentation
At issue in many insurance disputes is the matter of misrepresentation. For example, when a claim is made under an insurance policy, the insured party may feel that the coverage provided by the insurance company is less than what was represented or promised to them by the insurance company or its agent at the time of sale. If an insurance company or its agent promises one thing and then fails or refuses to fulfill that promise, they can be held liable for breach of contract, negligence, fraud, unfair insurance practices, or deceptive trade practices.

Nondisclosures
Insurance companies and their agents have an obligation to clearly and fully disclose any limitation or exclusions an insurance policy may contain. If they fail to adequately disclose such limitations or exclusions and then later use them as a reason for denying a claim by the insured, they may be liable for deceptive trade practices or unfair insurance practices. Unfair settlement practices Laws related to insurance settlement practices exist to protect insured parties from unfair or negligent practices of insurance companies. If an insurance company fails or refuses to pay benefits that are owed under the policy, if they pay them too slowly, or if they fail to act promptly to settle, they may be in violation of laws that exist to protect insurance consumers. Similarly, if an insurer's adjusters fail to adequately investigate a claim and pay too little as a result, then they have done a disservice to their customer and they can be held legally liable for it.

Other Misconduct
There are other ways that an insurance company may violate the law or otherwise cause harm to insurance customers. If an insurance company unreasonably terminates and insurance policy, unfairly discriminates against customers, or commits other unconscionable acts, they may be liable for their actions.

Compensation

Have you been injured by the misconduct or negligence of an insurance company?
If an insurance company has injured you through negligence, unfair or deceptive practices, or unlawful discrimination, you may be entitled to compensation for your loss, including compensation for damages over and above the insurer's obligations under your policy. Compensation that can be claimed varies according to the nature of the claim and lawsuit, but can include (depending on the circumstances) all benefits owed under the insurance policy, economic damages, compensation for mental anguish, attorney's fees, and any other relief the court deems proper.

Unfair Insurance Practices

The Texas Insurance Code defines and prohibits unfair and deceptive insurance practices. The statute allows a person to bring suit against a party who has harmed them, causing actual damages, by engaging in any act or practice that is defined as an unfair method of competition or unfair or deceptive act or practice in the business of insurance. Some of the practices specifically prohibited under the law are:

• misrepresentations and false advertising of policy contracts;
• false information and advertising generally;
• coercion and intimidation in the business of insurance;
• unfair discrimination;
• rebates;
• deceptive names, words, symbols, devices, and slogans;
• unfair settlement practices;
• misrepresentation of insurance policies

The provisions of the Texas Insurance Code that are most commonly used in suits brought by insurance customers against their insurance companies are those relating to unfair settlement practices and misrepresentation of insurance policies.

Unfair Settlement Practices
The Texas Insurance Code prohibits certain unfair settlement practices as they relate to claims by insured parties or beneficiaries of insurance policies. Prohibited practices include:

• misrepresenting a material fact or policy provision relating to coverage;
• failing to make prompt, fair, and equitable settlement of a claim after the insurer's liability is established;
• failing to promptly and fairly settle a claim under one portion of a policy in order to influence the claimant to settle an additional claim under another portion of the coverage;
• failing to promptly provide a reasonable explanation of the basis for denial of a claim or for the offer of a compromise settlement;
• failing to affirm or deny coverage of a claim or to submit a reservation of rights within reasonable time;
• refusing, failing, or delaying an offer of settlement under applicable first-party coverage on the basis that other coverage may be available or that other parties may be liable for damages, unless specifically provided in the policy;
• attempting to enforce a full and final release of a claim when only a partial payment has been made (unless it is a compromise settlement of a doubtful or disputed claim);
• refusing to pay a claim without conducting a reasonable investigation of the details of the claim;
• delaying a personal auto policy claim solely because there is other insurance of a different type available to satisfy all or part of the loss;
• requiring a claimant, as a condition of settlement, to provide their federal income tax returns for examination or investigation unless the claimant is ordered to do so by a court, the claim involves a fire loss, or the claim involves lost profits or income.

Misrepresentations
The Texas Insurance Code prohibits insurance companies and their agents from making statements that are outright false or misleading. Prohibited acts include:

• misrepresenting the terms, benefits, or dividends of a policy;
• misrepresenting the financial condition of the insurer;
• misrepresenting the true nature of a policy or class of policies;
• making any misrepresentation intended to cause a policyholder to allow an existing policy to lapse or be forfeited (such as to lure away or steal another insurer's customers).

An insurer is guilty of misrepresentation if they promise benefits and then refuse to pay them. They are also guilty of misrepresentation when they falsely represent that a policy offers benefits it does not have.

Compensation
If you have been injured by the unfair or deceptive practices of an insurance company, you may be entitled under the Texas Insurance Code to claim compensation for damages from responsible parties. Parties who may be liable can include any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers, adjusters and life insurance counselors.

Prompt Payment of Insurance Claims

Texas law requires insurance companies to acknowledge, investigate, and accept or reject insurance claims promptly.

The Prompt Payment of Claims Statute provided in the Texas Insurance Code imposes certain deadlines for an insurance company to acknowledge, investigate, and accept or reject a claim. If an insurance company violates the statue and the insured party can prove the existence of coverage, then the insurer can be held liable for attorney's fees and an additional 18% per annum in addition to the amount of the claim.

Duties of the Insurer
The following duties are imposed on insurance companies after they receive notice of a claim:

• They must acknowledge receipt of the claim. Each separate claim requires separate acknowledgment.
• They must record the acknowledgment, making a record of the date, means, and content of the acknowledgment if it is not in writing.
• They must begin an investigation of the claim.
• They must request from the claimant all items, statement, and forms that the insurance company reasonably believes will be required from the claimant. Multiple requests may be permitted when reasonably necessary, but multiple incremental requests may in certain cases be a violation of the statute.

With a few exceptions, most insurers must perform these duties within 15 days following receipt of notice of a claim.

Additional Duties & Deadlines
Once the insurance company receives all items, statements, and forms reasonably required by them, they are obligated to fulfill the following duties:

• The insurer must notify the claimant in writing within 15 business days that it accepts or rejects the claim. There is an exception permitted if the insurer suspects arson, and the insurer can also get a 45 day extension of the deadline.
• If the insurance company rejects the claim, the rejection notice must state the reason(s) for rejection.
• If the insurance company cannot accept or reject the claim by the normal deadline, they must notify the claimant and explain why more time is needed.
• Even if the insurance company gives notice of a requirement for additional time, they must still accept or deny the claim within the additional 45 period.
• If the claim is valid, the insurance company must pay the claim within 60 days after receiving the items requested from the claimant. This is a strict deadline and if an insurer fails to meet it, they are liable for the claimant's attorney's fees and damages of an additional 18% per annum in addition to the amount of the claim.
• The insurer must pay the claim within 5 business days after notifying the claimant that the claim will be paid.
• If the insurance company makes an act by the claimant a condition of payment, then the deadline is 5 business days after the act is performed. (Surplus lines insurers have 20 days for fulfill their obligations under either scenario.)

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