It wouldn’t be possible to own your home without property damage insurance. Sudden storms, wildfires, or even a burst pipe could put you out of pocket for tens or even hundreds of thousands of dollars, making insurance a valuable safety net. But what happens when you suffer a loss and the insurance company refuses to come to your aid? Attorney Bill Voss explains what you need to file a bad faith claim in order to get the compensation you deserve.
What Are Some Examples of Bad Faith?
When you bought your policy, you made a contract with your homeowners insurance company. If you have a legitimate claim, the insurer is duty-bound to provide payment up to the policy limit. Unfortunately, many insurance companies create obstacles to avoid paying full value on claims. If your insurer fails to pay a claim that should be covered, you can hold them accountable for “bad faith.”
You may have a bad faith claim if your insurer:
- Is delaying your claim without explanation
- Hasn’t acknowledged receipt of your claim
- Is stalling the investigation of your claim
- Is trying to settle your claim for significantly less than the claim is worth
- Issued a payment without explaining what the payment was for
- Used failure to submit forms as a reason for denial without requesting such forms
- Is asking for unnecessary documentation or multiple forms with the same information
- Has accused you of misbehavior or criminal activity related to the damage
- Has advised you not to hire an attorney
- Is refusing to pay for contractors or work that was previously approved
How to Provide Evidence of Bad Faith
The burden of proving a bad faith claim always falls to the insured person. In Texas, there are two ways to prove bad faith: the first is known as a common law bad faith claim. This type of claim requires a policyholder to show that an insurance company denied a claim even though liability was reasonably clear. Only a policyholder (not a third party) can pursue a common law bad faith claim.
The more common type of claim is called a statutory bad faith claim. This requires you or your attorney to show that the insurance company did something strictly prohibited in Chapter 541 or 542 of the Texas Insurance Code. These chapters of the law are important to your case, as they specifically forbid insurance companies from committing any “unfair or deceptive acts or practices in the business of insurance.”
There are many different illegal actions in the Texas Insurance Code, including:
- Misrepresenting a material fact or policy provision related to coverage
- Failing to attempt to make a fair settlement when liability is reasonably clear
- Failing to act in good faith to reach a prompt 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 of time
- Denying or refusing to pay a claim without conducting a reasonable investigation of the claim
- Enforcing a full and final release of a claim from a policyholder when only a partial payment has been made
- Demanding a copy of an insured’s federal income tax returns as a condition of settling the claim
- False advertising (such as misleading the public or misrepresenting the services offered by the insurance company)
The best way to prove bad faith is to keep good records. Document all conversations with your insurer and adjusters, keep letters and emails from the company and request that your insurance company communicate with you in writing whenever possible.
A Successful Bad Faith Claim Could Pay Three Times the Damages
Under state law, an insurer that is found guilty of bad faith can be ordered to pay for the cost of your claim (plus interest), the amount you paid in court costs and to hire an attorney, and even the costs of mental stress or anguish you suffered in fighting for your payment. Texas law also allows policyholders to collect up to three times the amount of your actual damages if you can prove an intentional or knowing violation of Chapter 541 of the Texas Insurance Code.
If you’re tired of fighting with an insurance company to get what you are owed, the experienced bad faith attorneys at Voss Law Firm can help you get the compensation you deserve. Fill out our contact form today to get answers to your questions, or start reading your copy of our free book, Your Essential Guide to Residential Claims.