Suing an Insurance Company for Bad Faith Claim Practices. How it Works?January 24, 2017
Bad faith can occur when an insurance company manufactures reasons not to pay a claim, unreasonably delays the claim process, denies a valid claim for an invalid reason, or underpays a valid claim without reason. As a profit-driven industry, insurance companies have a strong desire to continually increase profit margins. This motivation can encourage companies to choose a small profit over their own clients through attempts to underpay, or quickly settle claims before their insured become aware that they are entitled to more. But how do you hold an insurance company accountable for these bad faith claim practices?
One method to hold insurance companies accountable is by suing them for bad faith. To establish bad faith, the insured has the burden of proving the allegation. Texas law requires that the party seeking a bad faith ruling shows the insurer failed to attempt to make a prompt, fair, and equitable settlement of a claim with respect to which the insurer’s liability has become reasonably clear.
Courts require that the allegations against the insurance company be supported by specific facts. That means that a court will not find bad faith unless the insured can provide specific facts that help the court answer the who, what, where, when, and how the insurer’s acts constituted bad faith. General allegations are insufficient if not supported by specific actions. These acts must show that, more likely than not, the insurer acted in bad faith.
Texas also recognizes claims for punitive damages and mental anguish. Punitive damages are not a form of reimbursement, but a punishment to discourage similar future actions. An insured can recover punitive damages if they can show that the bad faith is “accompanied by malicious, intentional, fraudulent, or grossly negligent conduct.” This occurs when an insurer acts or fails to act, despite knowing it is likely to lead to harm. For example, if an insurer knows that a roof is susceptible to collapse, but the repair is denied intentionally, punitive damages may be applicable.
To recover for mental anguish, a party must show the act caused a disruption in the insured’s daily routine. This can be shown with the nature, duration, and severity of the mental anguish. Continuing with the example above, if the roof was not repaired and it collapses, distress and anxiety may have been caused. When a court finds that the insurance company acted in bad faith, the insurance is required to pay the full claim as well as all attorney’s fees.
If you feel that your insurance company has acted in bad faith, we strongly urge you to contact an experienced insurance attorney. Having a knowledgeable insurance attorney by your side can make the difference between getting full payment of your claim’s value, or getting your claim denied, delayed or underpaid.
The attorneys at the Amaro Law Firm have vast experience dealing with insurance companies. Our consultations are free. If we cannot add value to your claim, we will not take your case. We are only paid if you receive full compensation for your denied or underpaid claim. Contact us today for a free claim evaluation.