Claim Under Paid

What Is “Bad Faith”?

Each state has a different approach to what constitutes bad faith. Some do not recognize it at all. Many states, like Texas, recognize both common law bad faith (judge-made law) and statutory bad faith (law passed by the state legislature). In Texas, the standards for statutory bad faith and common law bad faith have merged and are outlined in the Texas Insurance Code. These standards are repeated in many other states throughout the nation.

Some of the Statutory Prohibitions That May Constitute Bad Faith:

  • Misrepresenting pertinent facts or insurance provisions.
  • Failing to promptly communicate.
  • Refusing to pay claims without conducting a reasonable investigation.
  • Failing to affirm or deny coverage within a reasonable time.
  • Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of claims in which liability is reasonably clear.
  • Compelling a policyholder to file a lawsuit by offering less than the amounts ultimately recovered.
  • Failing to promptly settle claims under one portion of a policy in order to influence under another portion of the policy.

There are others as well.

In Texas, the jury will be asked whether or not these violations were done knowingly. If they answer “yes,” then the jury may award up to two times what the actual damages are in “additional damages” which the courts have characterized as “punitive damages.”

Common law bad faith can result in punitive damages as well, but the conduct must reach the level of gross negligence, a very high standard, and the jury must be unanimous. The punitive award in common law is not limited to two times actual damages, but the appellate courts will limit the award to some reasonable multiple of actual damages.

If you think you have been underpaid, you need to ask yourself these questions:

  • Will partial repairs devalue my property?
  • Would potential future buyers be discouraged from purchasing the property?
  • Would an inspector find hidden damage?
  • Can full repairs not be made with the amount I have been paid?
  • Has the bottom line of my business been adversely affected?
  • Has my business lost customers, tenants or profits?

If you answered “yes” to any of these questions, you may be entitled to additional compensation. Your insurance company sent their so-called “experts” to evaluate your damages. Who was looking out for you? Even if you were told there was no damage or little damage, are you sure there is not hidden damage?

Let us send our team of professionals to evaluate your home or business to see if you are owed much more than you have already been paid. Our team of attorneys, independent adjusters, contractors, engineers and other experts will be able to advise you on whether your insurance company has violated the law by improperly denying, delaying, or underpaying your claim.

If you or someone you know has experienced an insurance loss to your property, contact us or use our online form to have an experienced property insurance attorney review your case for free. You may be entitled to much more than you have already been paid.

Statute of Limitations

You cannot wait forever to file your lawsuit. Each state has its own statutory law that sets the time period in which you must file your lawsuit. If the time to file suit runs, you will be forever barred from filing suit. The time may vary depending upon the type of claim you are making. Each lawsuit will probably involve more than one claim.

For example, in Texas, a typical policyholder case against an insurance company may involve a breach of contract claim, a claim for violations of the Texas Insurance Code, a claim for violation of the Texas Deceptive Trade Practices Act, and common law bad faith.

The statute of limitations under Texas law for each is:

  • Breach of Contract: 2 years from the breach
  • Violation of the Prompt Pay Statute: Some cases say 2 years, some say 4 years
  • Violation of the Texas Insurance Code: 2 years
  •  Violation of the Texas Deceptive Trade Practices Act: 2 years
  • Common Law Bad Faith: 2 years

Many insurance policies try to shorten the time to sue by writing their own limitation period into the contract, sometimes as short as one year. Usually, those clauses run from the date of the occurrence giving rise to the claim.

In Texas, such limitation clauses in the policy have been held to be invalid unless the clause limits the filing of suit to no less than two years and one day from the denial of the claim. If the clause states the limitation as two years and one day from the date of the damages to the property, it is invalid. If the clause limits the filing of suit to two years or less from the date of the denial, it is also invalid. You should carefully read your policy.

A significant exception to the above statutes are policies issued by TWIA. Under the recently extended deadline, a policyholder only has 180 days to demand appraisal after receiving TWIA’s written notice accepting all or part of a claim arising from Hurricane Harvey. Failure to timely invoke appraisal may completely bar an insured’s ability to contest TWIA’s decision on the “amount of loss.” TWIA’s appraisal process and requirements are described in Insurance Code § 2210.574 and 28 Tex. Admin. Code §§ 5.4211-5.4222, as well as TWIA’s policy contracts.

Many insurance policies issued by private carriers try to shorten the time to sue by writing their own limitation period into the contract, sometimes as short as one year. Usually, those clauses run from the date of the occurrence giving rise to the claim. In Texas, such limitation clauses in the policy have been held to be invalid unless the clause limits the filing of suit to no less than two years and one day from the denial of the claim. If the clause states the limitation as two years and one day from the date of the damages to the property, it is invalid. If the clause limits the filing of suit to two years or less from the date of the denial, it is also invalid. You should carefully read your policy.

A lawyer needs time to investigate, evaluate, and prepare your case prior to filing suit. You should hire a lawyer many months before the limitation period runs. The issue of limitations is a very complex one with many exceptions. You should ask a lawyer how it will affect your case and not rely on what is written here.