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What is “bad faith” in insurance claims?

On Behalf of | Jan 22, 2021 | Personal Injury

When purchasing an insurance policy, the buyer has a reasonable expectation the provider will live up to its end of the bargain. Unfortunately, Texas courts may see plaintiffs suing insurance companies when the providers refuse to pay. While clients sometimes violate the insurance terms, there may be instances where the insurance provider committed “bad faith” actions.

Bad faith and insurance companies

When a covered client files a legitimate insurance claim, the provider might refuse to pay. Concerns may arise as to whether the insurance provider has acted in bad faith.

Failing to disclose terms in a homeowners’ insurance contract could be an example of bad faith. For example, denying a claim for wind damage because the damage falls below the policy’s deductible amount might be bad faith if the contract does not state that any deductible amount exists.

What if the adjuster “lowballs” the wind damage without any basis? An adjuster who deems damage to be $2,000 when an accurate figure is $8,000 could lead to a legal dispute between the insured and the insurer. What if some of the damage turned out to be due to negligence and not heavy winds? Such a denial might not be one made in bad faith.

Dealing with unfair claims practices

Rules, regulations and statutes attempt to address unfair claims practices committed by insurance providers. Regardless, an insurance company might still seek to find a way out of paying a legitimate claim. An insurance company may also attempt to delay payments unreasonably by dragging out the process.

Claimants attempting to represent themselves in the insurance settlement process might not be qualified to address bad faith practices. Individuals who feel they aren’t experiencing fair treatment may wish to hire an attorney.

Insurance companies have an obligation to hold up their end of a policy although some may engage in bad faith insurance practices. Attempts to avoid paying on a legitimate claim could lead to a civil suit, so claimants may want a lawyer’s assistance.