Delays in Your Homeowners’ Claim Could Be Grounds for a Bad Faith Lawsuit

Damage to your home can be stressful and costly, but you may take comfort in the fact that everything is replaceable under your homeowners’ insurance policy. You paid your insurance premiums for years just in case something like this happened, and after sending in your paperwork, you just need to wait for your claim to be paid.

Unfortunately, you might be kept waiting for quite a while. Insurance companies have been known to deliberately stall claims to make policyholders desperate and willing to accept smaller payouts. Attorney Bill Voss explains an insurance company’s duty under the law to provide prompt payment for property damage claims—and what can happen if they don’t settle your claim quickly.

Deadlines Insurance Companies Are Required to Meet

Delays can significantly increase the costs of a property damage claim, especially if you cannot live in the house until repairs are complete. For this reason, there are a variety of laws and regulations mandating when and how insurance claims must be paid.

Under Chapter 541 or 542 of the Texas Insurance Code, insurance companies have strict deadlines for:

• Acknowledging and investigating a claim. Within 15 days of receiving a claim, an insurer must acknowledge receipt of the claim, commence any investigation, and request any relevant forms or documentation from the claimant required to approve or deny the claim.
• Accepting or rejecting a claim. Insurance companies have just 15 business days after receiving requested forms, documents, or information to make a decision on a claim. If the claim is denied, the insurer must state the reason(s) for the rejection.
• Sending payments. If the insurer agrees to pay all or part of a claim, the insurer must issue payment within five business days of notification of claim acceptance.
• Resolving claims. The Texas Prompt Payment Act of 2003 requires insurance companies to pay out valid claims within 60 days of receiving notification, statements, and anything else needed to process the claim.
• Responding to policyholder requests for information. If you make a written request for information on your claim, your insurer must provide the information in writing within 30 days of your request.

Insurers Can Be Punished for Unreasonable Delays

Your homeowners’ policy is a contract between you and your insurer. If the insurance company knowingly violated that contract, it could be subject to a bad faith lawsuit. If successful, your insurer might be ordered to pay out the total value of your claim and significant payments above and beyond your policy limit.

If you are the victim of a late payment or underpayment, you may be entitled to:

• Three times the amount of your claim. If policyholders can prove their insurers knowingly violated Chapter 541 of the Texas Insurance Code, they could collect up to three times the amount of their actual damages.
• Interest. Late insurance payments are subject to an 18% annual interest rate in addition to the claim amount. Penalty interest will be added regardless of the amount the insurance company agrees to pay, and interest on the delayed amount is calculated from the date the payment was originally due.
• Underpayment penalties. Some insurers attempt to skirt the timely payment laws by issuing an on-time payment for less than the claim amount. These companies can be ordered to pay penalties depending on how long it took them to fully compensate you for your losses. For example, failure to pay a claim in full within 45 days of the payment deadline could face a fine of $100,000 or 50% of the difference between the billed and contracted payment rate.
• Overdue payment fines. The longer an insurer waits to send a check for the total claim amount, the more they could be ordered to pay in penalties. A correct payment made 91 days after the deadline could be subject to a $200,000 fine or 100% of the difference between the billed and contracted rate. The insurer could also owe a penalty if they deny a claim, and it’s later proven that the claim was valid.
• Attorney fees. In Texas, an insurer guilty of bad faith may be ordered to pay all of the policyholder’s court costs and attorney fees.

Let Us Advise You on Your Insurance Bad Faith Lawsuit

If you’re tired of fighting with an insurance company, the Voss Law Firm can help you get the compensation you deserve. Call us at 1-888-614-7730 or complete our contact form today to get answers to your questions, or start reading your copy of our free book, Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse, and Refuse.