Top Ten Insurance Scams in TexasSeptember 22, 2016
Insurance companies are for-profit institutions and have a financial incentive to underpay and deny insurance claims. On the one hand, they are contractually and legally obligated to properly evaluate and pay each claim within specified deadlines. On the other hand, not every underpaid or wrongfully denied claim will be disputed and insurance companies will save a vast sum of money by their bad faith practices. Most insurance companies have decided that acting in bad faith will increase their profits, even when disputes and lawsuits are factored in. Simply put, it is a cost of doing business. Because insurance companies do not act in your best interest, it is important to know some of the most common ways they act in bad faith.
- Underpayment. Insurance companies love to save money in any way possible. One of the easiest and most common ways they do this is by underpaying your claim. Even if they underpay by 5%-10% on every claim, insurance companies can save hundreds of millions of dollars.
- Delaying. Insurance companies have strict deadlines imposed by Texas law. Failure to follow these deadlines can subject the insurance company to harsh penalties. However, insurance companies know most consumers are unaware of the deadlines. They will often delay payment of your claim in hopes that you will get frustrated and just give up or accept the lower payment.
- Denying a claim without a written explanation. Under Texas law, insurance companies must provide a written explanation for the reason of the denial. The denial must be based on specific language from your policy. Failure to do so constitutes bad faith.
- Hiring Inexperienced or out-of-state adjusters. When the volume of claims increases, insurance companies typically turn to inexperienced or out-of-state adjusters. These adjusters are cheaper than an experienced adjuster and lack the knowledge ability to process claims efficiently. As a result, insurance companies are able to use this cheap labor to scam policyholders out of the rightful value of their claim.
- Denying a claim based on an improper inspection. When major catastrophes strike an area, insurance adjusters are pressed for time when inspecting homes. The demand for inspections is typically more than the adjusters can keep up with. As a result, adjusters often rush inspections or overlook some of the basics, leading to a wrongly denied or undervalued claim.
- Denying a claim due to wear and tear or inadequate maintenance. A common scam for an insurance company to deny a claim is to put the blame on the homeowner. By saying the damages are a result of the homeowner’s lack of maintenance or natural wear and tear, the insurance company hopes the homeowner gives up and does not dispute the claim.
- Lowball Settlement Offers. Insurance companies will try to force financially burdened policyholders into accepting a lowball settlement offer by making the offer quickly within the claims process. Policyholders who need immediate repairs and do not have the capital to perform them are more likely to fall victim to this scam.
- Misrepresenting the amount of insurance coverage available. Insurance contracts are long, complex documents. Insurance companies use this to their advantage to scam consumers by claiming the policy has less coverage than it actually does. If a homeowner believes they are getting the most allowed under their policy, they are more likely to accept the claim.
- Misrepresenting the exclusions under the insurance policy. Similar to misrepresenting the amount of coverage, here insurance companies will deny a claim based on an exclusion in the policy. Because they know most homeowners haven’t read every page of their insurance agreement, insurance companies misrepresent what the exclusion means and how it applies to the claim.
- Denying a claim based on intentional damage. This scam is especially prevalent when it comes to damaged roofs. Insurance companies claim that the dings and dents to shingles caused by hailstorms is the intentional damage of the homeowner. Even worse, sometimes insurance adjusters cause the damage themselves with a quarter and then blame it on the homeowner.
All of the above scams constitute bad faith insurance practices in Texas. Under Texas law, insurance companies that are found to act in bad faith are liable for the full amount of the claim plus your reasonable attorney’s fees. An insurance attorney can help you ensure that your insurance company handles your claim according to their duty of good faith and fair dealing.
The attorneys at the Amaro Law Firm have vast experience dealing with insurance companies. In fact, some of their attorneys worked as insurance company defense lawyers before joining the firm. Now, they help property owners fight for fair and just treatment. Our consultations are free. If we cannot add value to your claim, we will not take your case. When an insurance company is found to have acted in bad faith, they are required to pay reasonable attorney’s fees. Therefore, we are only paid if we win. Contact us for a free claim review.