Underpayment Of Insurance Claims
Making an insurance claim can oftentimes be stressful. You never plan on making an insurance claim. However, when you do, you hope the insurance company pays your claim as they promised when you purchased the insurance policy. The sad reality is many accepted claims are severely underpaid leaving the policyowner without the money needed to come back from an expected loss, injury, or disability. The good news is that there are laws that protect policyholders. If an insurance company underpays your claim, you may be entitled to recover interest, penalties, and attorney’s fees.
WHY ARE CLAIMS UNDERPAID?
Many people believe their insurance company has their best interest at heart. The reality is that insurance companies have a clear conflict of interest with their policyholders. An insurance company is more profitable when valid claims are delayed, underpaid, or denied. Sure, your personal interactions with your agent or even an insurance adjuster may not have seemed sinister. Perhaps they were even pleasant. However, it has been demonstrated time and time again that insurance companies routinely underpay claims to enhance their profits.
HOW ARE CLAIMS UNDERPAID?
We have seen a handful of tactics used by the insurance industry to undervalue claims. These tactics range from a general practice of ignoring damages, underestimating damages, refusing to acknowledge expert recommendations, and even falsifying reports. It is often like a game of cat and mouse where the insurance company is looking for a new angle to undervalue claims.
- Falsifying Reports
Insurance companies have been caught falsifying expert reports to support the denial and underpayment of claims on multiple occasions. For example, certain insurers have rewritten draft reports from engineers to provide a rationale to deny a claim. This has been particularly rampant after major catastrophic events. Even though the insurance companies outside expert may have believed that claim was valid, the insurance company rewrote reports so it wouldn’t have to pay.
- Ignoring Damages
A common practice by insurance companies is to hastily conduct an inspection or examination and then limit the initial payout. This is a significant problem in property damage claims where a field adjuster may spend a very short period of time inspecting the property. The insurance adjuster almost always fails to acknowledge items that are damaged. This may include everything from clear water damage on sheetrock to obvious structural damage and a collapsing foundation. While the insurance company may claim this is an innocent oversight the reality is this is how its field adjusters are trained. These underpayments are disheartening for the policyholder because claims are often made at a moment of desperation when money is needed to be made whole.
There is a phrase used in the insurance industry called pay and pray. This means the insurance company we’ll sprinkle some money have to it’s insured in pray that he or she does not return seeking a supplemental payment. The insurance company knows most people do not contest their claim. Because of this, they can often get away with ignoring damage. Fighting back is often worth it. We have had many claims where the insurance company paid five times, ten times, and more above the initial payout due to items that they “overlooked.”
For medical, disability, and injury claims, many adjusters simply will refuse to acknowledge evidence that proves a claim should be paid. Instead of relying on the experts who have the best idea about the nature and extent of the insured’s damages, an adjuster may claim that the insurance company’s criteria for payment have not been met.
- Ignoring Expert Opinions
Most insurance adjusters have never worked have contractors, medical doctors, economist, or other types of professionals often utilized to prove damages in an insurance claim. Despite this, insurance adjusters often do not fairly consider expert opinions that prove-up what is owed.
- Relying on the Insurance Company’s Expert Reports
Disputed insurance claims often become a battle between each side’s experts. In many cases, the insured’s contractor or doctor will provide a report or estimate to support a claim. Insurance companies sometimes will turn to an expert that tends to work exclusively for the insurance industry. These experts almost always issue a report that contests the claim altogether or substantially reduces the damages that are being claimed.
We always tell clients that they should not be concerned when another expert disagrees with their claim. An insurance company that retains a “hired gun” to help them reduce what is owed has simply become part of the culture of insurance claims.
IS AN INSURANCE COMPANY IN BAD FAITH IF IT UNDERPAYS A CLAIM?
Many cases have elements of bad faith. The ultimate question that must be answered for each case is will a judge allow you to present your bad faith claims to a jury. In cases involving underpaid claims, you can have bad faith if the underpayment is significant and cannot be justified. This is particularly true in significant claims where the adjuster ignored damages and failed to promptly pay a supplemental payment when demanded. Importantly, the deadline to issue payment on a claim often begins with the initial inspection or receipt of proof of loss establishing the damages that are owed. While additional investigation is sometimes needed, the law provides specific deadlines for adjustment and payment.
WHAT ARE YOUR OPTIONS IF YOU HAVE BEEN UNDERPAID?
When your insurance company resists paying what is owed, consulting with an experienced insurance attorney is advisable. In many cases, you may learn that you either have a good penalty or interest claim, or, in some other cases, that you may be entitled to significantly more in damages under your policy.
If you are dealing with an underpaid insurance claim, call us to schedule a free consultation. We assist clients with all types of insurance matters.