You’ve all heard the story before. A citizen pays thousands every year to insure their car or house, thankfully never needing to file a claim. Then, tragedy strikes. Facing tens of thousands of dollars in damage, the insured files a claim with their insurance provider, only to be met with a measly settlement offer that will cover a fraction of the repairs, or worse, they are outright denied coverage for a claim. Maybe rather than having your claim approved or denied, perhaps you have been getting the runaround from your insurance company for weeks or months while your home or car sits in shambles. These situations are characterized as your insurance company acting in ‘Bad Faith,’ and you may have a lawsuit on your hands to get the money you are entitled to. If this sounds like your situation, it’s time to get in touch with an insurance claims lawyer.
Whether your roof insurance claim was denied after a major hail storm or your insurance company is giving you the runaround after your commercial building experienced a fire, the insurance attorneys at Alex Hernandez Jr. Business Law are here for you.
When you are denied adequate coverage by your insurance company, it can feel like all hope is lost. They seem to be the ones in power and you’re at their mercy. But thankfully, there are provisions in place to protect insureds from being taken advantage of by their insurance providers and to hold insurers accountable for providing their clients the coverage they are promised.
First Party Claims Versus Third Party Claims
There are two main types of bad faith insurance claims in Texas. A first-party insurance claim is when an insured files a claim with his or her own insurer. An example of a first-party claim is when a homeowners roof is damaged by hail and they submit a claim to their homeowners’ insurance provider for roof repairs. If an insurer acts in bad faith during a first-party claim, they might insufficiently inspect the damage or undervalue the damaged property, or they might even ignore the claim altogether.
On the other hand, a third-party claim happens when an outside party files a claim or a lawsuit against an insured person. For example, let’s say a driver is t-boned in an intersection after another driver runs a stop sign. The first driver decides to sue to driver that ran the stop sign. The sued driver reports the lawsuit to their insurance carrier, and the insurance company will then hire a lawyer to defend the insured in court and possibly be held liable for paying out medical expenses and damages to the suing party. If an insurer acts in bad faith during a third-party claim, they might refuse to hire legal aid to defend their insured or not pay out the entirety of the insured’s liability policy limits, leaving the insured struggling to pay out the remaining medical bills for the other involved party.
The Stowers Doctrine Sets The Precedent For Insurance Claims
In 1929, a Stowers Furniture Co. truck collided with a horse-drawn carriage. Stowers Furniture, who was insured by American Indemnity Co., had an auto liability policy of $5,000. However, despite proof of excessive damages, American Indemnity refused to pay the full policy amount. The Stowers Furniture Co. sent American Indemnity a letter that gave them the opportunity to settle the claim within policy limits, and the insurer refused and the case went to trial. The insurance provider lost the case, but it wasn’t over yet. The Stowers Furniture Co. sued their insurance provider, claiming they had acted negligently by refusing to settle the claim when given the opportunity, and that they had an obligation to their insureds to settle claims fairly and protect their clients. The trial court decided there was no cause of action for the Stowers case, as did the appellate court. However, the Texas Supreme Court stepped in. They agreed that the insurance provider has a responsibility to protect the insureds as if they were handling their own claims, awarding Stowers over $14,000. This court case set a precedent for forthcoming instances when insurance companies acted in bad faith, when they intentionally and knowingly try to withhold a deserved payout.
These days, many insured people will send their insurance providers a “Stowers demand” if a claim is not sufficiently settled. A Stowers demand letter typically must make a demand that is within policy limits and meet certain other requirements to improve the chances of a fair payout.
Bad Faith Insurance Claims
Bad faith insurance lawsuits can stem from a number of actions by the insurance provider. We have listed some of these. If you are currently experiencing any of the following, it can help to have a bad faith insurance lawyer on your side who can negotiate a fair settlement on your behalf.
- Unwarranted denial of coverage – the insurer denies a claim for an illegitimate reason
- Failure to communicate pertinent information to the claimant
- Failure to conduct a reasonable investigation of the claim – the insurer sends out an unqualified adjuster or the adjuster does not investigate the extent of the damage
- Refusal to pay the claim without investigating – the insurer denies a claim for damage without sending out an adjuster
- Failure to deny or pay the claim within a reasonable period of time – the Texas Insurance Codes outlines timelines for claim denial or payment
- Failure to confirm or deny coverage within a reasonable period of time
- Failure to attempt to come to a fair and reasonable settlement when liability is clear – this is a similar situation to the Stowers case detailed above
- Offering substantially less money to settle than the true value of the claim – when an insurer “lowballs” a claimant
- Failure to promptly provide a reasonable explanation for denial of a claim – if an insurer denies a claim but doesn’t have a good reason for doing so
- Failure to enter into any negotiations for settlement of the claim
- Failure to respond to a time-limit demand
- Failure to disclose policy limits – an insurer refuses to disclose or lies about the true limits outlined in an insured’s policy
Need An Insurance Claim Lawyer In Texas? We’re Here For You
If you filed a claim with your insurance company and they are acting in bad faith, you could have a legitimate lawsuit against them. Get in touch with the trial lawyers at Alex Hernandez Business Law today to go over your claim and decide the best route to take to get you the compensation you deserve. Insurance companies are required to act in good faith on behalf of the client, and if they are avoiding you or outright denying your claim without a reasonable effort to come to a settlement, you need an insurance lawyer on your side. Get in touch today to learn more about bad faith insurance claims.