How Do You Know If Your Insurer Is Acting in Bad Faith?
When you file an insurance claim, you expect your insurer to investigate the loss fairly and honor the coverage you purchased. But sometimes an insurance company may delay, underpay, or deny a legitimate claim without a reasonable basis. These actions can potentially constitute insurance bad faith. Understanding the warning signs can help policyholders recognize when an insurer's conduct may warrant further investigation.
What Is Insurance Bad Faith?
Insurance bad faith generally refers to an insurer's failure to handle a covered claim honestly, fairly, and in accordance with its legal obligations. Insurance companies have contractual responsibilities under their policies and may also have duties imposed by state law.
A disagreement over the value of a claim does not automatically mean an insurer is acting in bad faith. There must generally be evidence that the insurer's conduct went beyond a legitimate coverage dispute.
Unreasonable Delays in Processing Your Claim
One potential warning sign is an unexplained or unreasonable delay. Insurers typically need time to investigate complicated losses, but repeated requests for unnecessary documentation, failure to communicate, or prolonged periods without meaningful updates can raise concerns. Keeping a record of calls, emails, claim submissions, inspections, and other communications can help establish the timeline.
Denying a Claim Without a Reasonable Basis
Another red flag is a claim denial that appears inconsistent with the policy language or the evidence available to the insurer. For example, an insurer may deny a claim without adequately investigating the reported damage or may rely on an exclusion that does not appear to apply. Policyholders should request a written explanation of any denial and review the specific policy provisions cited by the insurer.
Offering Significantly Less Than the Claim May Be Worth
An insurer does not necessarily act in bad faith simply because its valuation differs from yours. However, consistently undervaluing damage, ignoring relevant evidence, or refusing to consider documentation supporting a higher amount may raise questions about the claims process.
Independent estimates, photographs, repair invoices, expert reports, and other documentation can be important when challenging an insurer's valuation.
Failing to Investigate Properly
Insurance companies generally have an obligation to conduct a reasonable investigation before making certain claim decisions. An adjuster who ignores important evidence, fails to inspect obvious damage, or reaches a conclusion before completing an adequate investigation may create potential bad-faith concerns.
What Should You Do If You Suspect Bad Faith?
Start by preserving all documentation related to the claim. Review your policy carefully, request explanations in writing, and keep detailed records of communications with the insurer.
If you believe the insurer is mishandling your claim, consider consulting an insurance attorney familiar with the laws in your state. In Texas, depending on the circumstances, policyholders may have potential remedies under provisions of the Texas Insurance Code and other applicable laws.
Bad faith claims are highly fact-specific. An unreasonable denial or delay may be concerning, but determining whether an insurer has actually acted in bad faith requires examining the policy, evidence, communications, and circumstances surrounding the claim.
