Although you diligently pay your insurance premiums every month, the last thing you really want to do is file a claim. Doing so means that you’ve experienced extensive property damage or a similar loss that’s left you struggling financially and emotionally. What can make the situation even worse is when the insurance company you trusted (and paid) to cover you during this difficult time adds to the heartache.
Unfortunately, there are insurance companies that do not act in the best interests of their clients. If your insurer is using bad faith tactics to minimize or avoid paying your claim, a Houston insurance attorney at the MIC Firm will protect your best interests and fight for the fair settlement you deserve.
What is Bad Faith Insurance?
A typical insurance contract has a straightforward premise: the customer pays a monthly or a yearly premium to the insurance company, the amount being based on their risk factors. In return, they receive significant financial assistance in the event of a covered loss, such as a flood, fire, car accident, or health crisis.
Insurance companies initially profit by receiving guaranteed payments to provide protection against hypothetical future events that may not occur. This is a reasonable tradeoff between both parties, and federal law requires insurance companies to act in good faith toward their insured clients.
Some insurance companies, however, don’t always honor their contracts. Claimants either don’t receive a full and fair settlement or are denied payment altogether, despite their right to it. This is considered acting in “bad faith.” Unfortunately, this practice is fairly common because many people are unaware of their rights and don’t know that they can fight claim denials. The bad faith insurance lawyers at the MIC Firm provide affected claimants with the legal representation they need to hold their insurer accountable and maximize their insurance benefit.
Examples of Bad Faith Insurance Tactics
Bad faith actions are not unique to a single insurance sector. They can and do happen with a wide range of policies, including car insurance, uninsured and underinsured motorist insurance, life insurance, homeowners insurance, and health insurance.
Actions that constitute bad faith are equally varied. They include but may not be limited to:
- Failing to acknowledge receipt of a claim
- Not conducting a prompt and thorough investigation of a claim
- Unnecessary documentation requests
- Withholding benefits without having a reasonable basis for doing so
- Misrepresenting or misinterpreting the law or policy
- Unreasonably denying insurance coverage
- Refusal to provide a reasonable settlement
- Terminating a valid claim
- Failing to notify you of alterations to your policy that may affect your claim
- Delaying payments for an unreasonable amount of time, especially when liability is clear
- Using threatening language
- Accusing you of fraud
- Refusing to provide routine documentation
- Failure to explain an arbitration appeals policy
- An increase in premiums due to a claim in which the insured was not at fault
- Offering an unreasonable settlement amount and refusing to negotiate
- Modifying or canceling your insurance policy after you have made a claim
This type of conduct is contrary to the Texas Insurance Code, which requires insurance companies to treat their policyholders with good faith. Specifically, Chapters 541 and 542 expressly state that insurance companies operating in Texas must:
- Investigate your claim promptly and thoroughly
- Fairly evaluate the evidence
- Communicate with you at all stages of the claim
- Assess your liability for your injuries or other losses
- If a claim is made, interpret the policy honestly and correctly
- Make every effort to resolve the claim as soon as possible
- Accept or deny your claim
- Provide a written explanation for any denial
- Negotiate the settlement of an insurance claim in good faith
When a policyholder pays their premiums on time, an insurance company is legally required to consider and take action on any claim made. In some cases, however, insurance companies ignore the rules and instead use the ‘delay, deny, defend’ strategy to reduce or get out of their obligation. At the MIC Firm, our bad faith insurance lawyers are familiar with the tactics that these insurers use to avoid paying out claims and will take legal action to protect your rights.
Proving a Bad Faith Claim in Houston
There are two ways that you can prove a bad faith claim in Texas: as common law or statutory bad faith claim.
With the common law option, you must demonstrate that the insurance company delayed or denied your claim despite reasonably clear evidence of liability. Statutory claims, which are brought under Chapter 541 of the Texas Insurance Code, cover actions like those outlined in the previous section, such as failure to reasonably explain why a claim was denied or issuing a denial without even investigating. The MIC Firm will use the approach that represents the best chance of a favorable outcome in your case.
The Texas Prompt Payment Statute
Chapter 542 of the Texas Insurance Code outlines insurer obligations to respond to, investigate, and pay legitimate claims. If your insurance company fails to do so, you can recover damages in the form of a yearly 18% penalty as well as your attorney fees.
To collect these damages, you must have notified the insurer in writing of your claim or underpayment allegation. Once it receives your notice, it has 15 days to acknowledge the claim, investigate it, and request additional information from you. Once the company receives all the information it needs, it has 15 days to make a determination, although that deadline may be extended to 45 pays.
If it accepts your claim, the insurer must pay you within five business days. If the claim is denied, it must provide clear reasons for the denial. Failure to comply can result in liability for your attorney fees and other penalties.
What Damages Can Be Collected In A Bad Faith Lawsuit?
If you win your lawsuit and can prove a knowing or intentional violation, you could receive up to three times the amount the insurer would have paid had it processed your claim properly in the beginning.
In addition to the policy’s benefits, you may be entitled to consequential damages, such as lost wages, attorney fees, and mental anguish damages (the latter is not available if you are a business). You may also be able to recover punitive damages if your insurer committed flagrant, intentional, and/or gross misconduct. Also known as exemplary damages, they are meant to punish an insurance company for its bad faith conduct rather than repay you for the losses you sustained.
A Houston bad faith attorney at the MIC Firm can explain your options and pursue an outcome that compensates you fairly for the insurer’s refusal to handle your claim in good faith.
What is a Third-Party Insurance Bad Faith Claim?
A third-party claim requires your insurance company to defend you when someone holds you responsible. In Texas, most policies of this type provide basic legal defense, cover claims, and must settle claims when the insured is at fault.
Let’s assume that a person shopping in your clothing store trips over discarded merchandise and falls. If they sue you, your insurer must represent and defend you at no additional cost if the plaintiff was at fault for the accident in any way. Texas law also requires them to try and settle the claim so you aren’t liable for any judgment that exceeds your policy limits. In the event that your insurance company breaches any of these duties, you may file a third-party bad faith claim.
How Can the MIC Firm Help You?
The MIC Firm has helped hundreds of policyholders across 11 states resolve disputes with their insurance companies. Every Houston insurance bad faith lawyer on our team draws on this extensive experience to help determine whether a company handled a claim appropriately. We also have in-depth knowledge of insurance industry practices and substantial trial experience that has resulted in several favorable verdicts for clients.
Our law firm represents corporate and individual policyholders in large and complex insurance litigation and recovery matters and has established a reputation for succeeding in cases involving bad faith practices. We have litigated bad faith cases across Texas, Louisiana, and other states on behalf of individuals, small and midsize businesses, and national companies. Our insurance lawyers regularly handle bad faith cases involving a wide range of policies, including homeowners, automobile, general liability, property, and commercial liability.
The MIC Firm’s experienced lawyers have a reputation for being aggressive litigators and worthy opponents that get results for our clients. Whenever possible, our Houston bad faith insurance attorneys strive to resolve matters outside of court, but when that isn’t possible, we are fully prepared to take the case before a judge or jury.
Speak to Our Houston Bad Faith Insurance Lawyers About Your Case
Insurance companies don’t always have your best interests in mind. It’s important to remember that they are private businesses with their own bottom lines to protect, often at the expense of their policyholders. When your insurance carrier cancels your coverage after you make a valid claim or only provides a partial payment amount, you’re probably a victim of bad faith insurance practices, and the MIC Firm will fight for your right to receive the insurance benefits you deserve. To learn more, contact us today for a free initial consultation about your bad faith insurance claim.