What to do when your insurance company won’t pay up
Insurance companies have a duty to their clients that takes into account the inherent power struggle in the relationship.
In their relationship with the insured, the company has to investigate, negotiate and settle claims in good faith – this is because of the implied covenant of “good faith and fair dealing” that underlies every contract into which they enter.
This covenant says that the parties have to treat each other exactly as the title requires: fairly and with good faith. Insurance companies owe this common law duty as well as statutory duties found in chapters 541 and 542 of the Texas Insurance Code. Since the parties have a “special relationship,” there is a duty of care.
However, when an insurance company violates this covenant by acting in an unreasonable manner or with reckless disregard, those actions are called “bad faith.” Every jurisdiction, including Texas, allows insureds to bring claims for bad faith against their insurance company if they found their claim to be denied on an unreasonable basis.
Examples of bad faith actions
There are many types of bad faith that can arise; listed below are the most popular tactics that insurance companies use.
- Failing to communicate promptly with a client who has submitted a claim;
- Neglecting to properly investigate a claim;
- Denying a claim without offering a good reason;
- Delaying payment of a valid claim;
- Refusing requests for documentation (or making the insured sign multiple copies of the same documents in order to slow the process down);
- Forcing the insured to initiate litigation because of a low-ball settlement offer;
- Misrepresenting the law; or
- Attempting to force the insured into a lower settlement than coverage would warrant.
Proving bad faith
Bad faith is proven by specific facts and circumstances, and you have to establish that the insurance company’s actions indicated a clear disregard for the insured. This can be extremely difficult to prove, which may mean that you need to hire an attorney. If you haven’t hired one yet or don’t know where to start, consider speaking with an Enjuris Texas law firm partner!
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