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Texas Trial Lawyers

When does an insurance company act in “bad faith”?

On Behalf of | Aug 19, 2021 | Uncategorized

An insurance policy comes with terms and conditions. When the insured enters into a lawful agreement with the insurance provider and pays all premiums, the provider assumes the risks. So, if a Texas homeowner files an insurance claim to cover wind damage, the insurer should honor a valid claim. Sometimes, the provider may deny a claim for dubious reasons, leading to a “bad faith” lawsuit.

Bad faith and insurance claims

Bad faith insurance practices involve a provider failing to live up to its agreement. An insurance company won’t state it refuses to pay because it doesn’t want to pay. Rather, the insurance company will provide a denial letter that details why it won’t pay. The insured may dispute the insurance company’s stance.

For example, the insurance company might claim an exclusion that does not exist. Or, the provider may “interpret” the language to fundamentally expand an exclusion’s criteria. Perhaps a homeowner’s dog bit someone, and the insurance provider claims it falls under an excluded breed category when it doesn’t. A court challenge might follow.

There are other actions an insurance provider could perform that constitute bad faith. Making excessive and unrelated evidence demands would be one. Delaying an investigation or refusing to investigate are other examples.

Suing the insurance company

Insurance bad faith instances might result in a lawsuit. When the insurance company breaches its contract, the insured might find legal action serves as the only way to receive compensation. Insured parties should remain mindful of how much time passes. At some point, the statute of limitations may prevent a lawsuit.

Customers rely on insurance companies to protect their financial interests. A lawsuit might lead to a favorable result for those policyholders who are stressing over their potential losses.