Legal requirements bind insurance companies to behave honestly and fairly when handling claims. Policyholders have the right to seek legal action if an insurer falsely rejects or delays a claim, therefore behaving in bad faith. Below is a step-by-step guide on how to sue an insurance company for bad faith.
Understand What Constitutes Bad-Faith
Not every denied claim qualifies as bad faith. Some common examples of bad faith by an insurance company include:
- Unjustified claim denials without a valid reason.
- Delays in processing claims beyond a reasonable timeframe.
- Failure to conduct a proper investigation before denying a claim.
- Offering significantly lower settlements than what the policy covers.
- Misrepresenting policy terms to avoid paying a claim.
Gather Evidence of Bad-Faith
Before filing a lawsuit, policyholders must collect documentation that proves bad faith behavior, including:
- A copy of the insurance policy and claim details.
- Emails, letters, and communication records with the insurer.
- The insurer’s explanation for denying or delaying the claim.
- Expert reports or contractor estimates showing damages and repair costs.
File a Complaint with the Insurance Department
Prior to initiating legal action, it may be beneficial to submit a complaint to the Texas Department of Insurance or the appropriate state regulatory authority. They may investigate and push the insurer to act fairly, sometimes resolving the issue without litigation.
Hire a Bad Faith Insurance Attorney
An experienced bad-faith insurance attorney can review the case, determine if legal action is necessary, and negotiate with the insurer. Numerous attorneys provide complimentary consultations and operate on a contingency fee arrangement, signifying they receive payment solely upon the successful resolution of the case.
File a Lawsuit Against the Insurer
If the insurer fails to behave justly, the subsequent course of action is to initiate a bad-faith lawsuit. With this legal action, you can seek:
- The full value of the original claim
- Additional damages for financial losses caused by the delay or denial
- Punitive damages to punish the insurer for egregious misconduct
- Attorney’s fees and court costs
Negotiate or Go to Trial
Once a lawsuit is filed, the insurer may settle to avoid a court battle. Should no consensus be established, the matter proceeds to trial, where a jury or judge decides whether the insurer behaved with bad faith.
Conclusion
While suing an insurance company for bad faith is difficult, policyholders have legal protections when insurers behave improperly. Bad-faith practice victims can seek the compensation they are due by compiling proof, consulting attorneys, and acting.