Insurance policies exist to provide businesses and individuals with the peace of mind that comes from having financial protection against unexpected excessive losses. In exchange for a monthly or annual premium, the policyholder is then entitled to receive a payout promptly after the insurance company is notified of a covered accident (which is when the money is needed most). A claim for substantial property damage that is not handled quickly in good faith can be devastating for a small business owner, in particular, causing unnecessary further disruption to its operations and a loss of revenue or customers that may be impossible to replace, not to mention substantial mental distress. Severe damage to a home does the same to individual lives no less. Working with an experienced McKinney, Texas, first-party property damage attorney can help you get all the insurance compensation you deserve so you can get your business or home back on its feet.
Discuss Your First-Party Property Damage Claim with a Dallas-Fort Worth Attorney
Have you experienced damage to your commercial property or home due to a fire, severe weather, water damage, theft, vandalism, negligent conduct of others, or some other type of accident? Are you struggling to obtain a fair settlement from your insurance company or third-party claims adjuster? If so, you need an experienced commercial litigation attorney to bring the reluctant payor back in line. Contact Wright Commercial Litigation for a free consultation to learn more about how the firm can help you recover all the benefits provided by your insurance policy for any type of property damage, casualty, or other loss.
What is a First-Party Insurance Claim for Property Damage or Loss?
A first-party insurance claim involves harm or losses suffered directly by the policyholder seeking compensation or benefits from its own insurance provider—i.e., the insured person is the “first party” to the insurance contract with the carrier being the “second party.” (Allegations by others against the insured for liability that is covered by insurance are the other main category of claim, which are then generally known as “third-party” insurance claims.)
Most first-party property damage or losses in the commercial sector involve a business owner who took out an insurance policy to protect its building premises, equipment, inventory, reputation, or business operations more generally. When any of that is damaged, destroyed, stolen, lost, impaired, or otherwise disrupted by an event that is covered by the terms of the insurance policy, then the insurance company is obligated to pay for repair or replacement and otherwise compensate the losses up to limits stated in the policy (which are found summarized on the declarations page). The policy may also provide funds to cover lost income or a revenue gap for the business though, to continue paying staff and bills in the interim, and to potentially relocate or reestablish the business enterprise somewhere else altogether.
First-party loss claims by a homeowner are similar in that the policy covers repair or replacement of residential property and improvements along with most contents and personal items found inside (at either an actual cash value (ACV) or replacement cost (RC) depending on the circumstances and conditions of the policy) when damaged by a covered peril. The types of perils are broad with numerous exclusions and exceptions (and exceptions to the exceptions). Such policies typically also provide for “additional living expense” that results from an increase in costs when the damaged part of your residence is no longer fit for use until repaired or replaced, and can reimburse lost rental income if part of your home was leased to others. Many homeowner policies these days also include coverages and benefits for things like identity theft, credit card fraud, and cyber attack. It all depends on the specific features beyond state-mandated minimums that a homeowner signed up for when procuring the insurance policy.
Insurance Companies Cannot Act in Bad Faith for a First-Party Property Damage Claim
If you are a business owner, insurance is a crucial aspect of your planning and operations in many different ways (and homeowner’s insurance is mandated by mortgage companies to protect their lending). When an insurance carrier fails to follow through on its promises to promptly pay for a covered loss, it can completely destroy any hope of carrying on business and upend lives.
Insurance companies are primarily for-profit enterprises though, with even the “mutual insurance company” variety (i.e., those nominally “owned” by policyholders) ultimately run by executives, managers, and administrators who care most about the numbers more than the people and whose own compensation may be tied to financial results in ways similar to corporate carriers. All insurance companies, adjusters, and third-party claim administrators are thus prone to utilizing practices that may routinely deny valid property damage or loss claims in the first instance, for any number of reasons – some unintentionally the result of poorly thought-out policies and others far worse. Even when a claim is not outright denied, insurance professionals naturally have an incentive to keep payouts low and are quite adept at doing so in ways that subtly exploit less-informed consumers or business owners facing the worst circumstances of their lives and needing immediate relief.
Fortunately, Texas law provides enhanced remedies against unjust insurance claims practices as a sort of disincentive. Texas law explicitly prohibits insurance companies and their adjusters from acting in bad faith to delay or deny payment of an objectively legitimate claim, and at a minimum compensates policyholders who are not promptly paid by a statutorily-increased rate of interest (18% in general and 10% for certain weather-related claims) and attorneys’ fees.
Proving Bad Faith
Insurance companies who renege on their contractual obligations violate the law, sometimes in ways though that cross over to tortious bad faith or deceptive conduct. It is not enough to show an insurance company’s decision on a property damage or loss claim was merely incorrect though. That is an ordinary breach of contract that can be remedied by compensatory damages, fees, and increased interest under the Prompt Pay Act. Instead, to prove the more culpable conduct, a policyholder must show a breach of the implied duty of good faith and fair dealing or certain statutorily-prohibited acts.
Specifically, as it pertains to a first-party property damage or loss claim, the policyholder must be able to establish the insurance company delayed, withheld, or underpaid benefits owed under a policy when the liability was “reasonably clear,” or else that it misrepresented coverage provisions, key facts, or exercised unfair leverage to achieve an unfair settlement of claims. Examples of an insurance company acting in such ways may include the following:
- Unreasonable delay in acknowledging or investigating the claim
- Failure to conduct a reasonable investigation into the claim
- Using professionals known to be biased to conduct investigation or analysis
- Interpreting policy language in an unreasonable manner
- Misrepresenting provisions in a policy to the insured
- Using an unduly restrictive interpretation of the facts of the claim
- Misrepresenting, misleading, or leaving out a fact that is material to the claim
- Failing to provide a reasonable explanation in writing of the basis for a denial
- Improper valuation of a claim (or “lowballing”)
- Failing to reimburse for the entire amount of property loss suffered
- Unreasonable delay in paying benefits
- Delaying or withholding payment on the basis of the existence of other insurance coverage (unless explicitly addressed and allowed by the insurance policy)
- Delaying or withholding payment on the basis that other persons are responsible for the damage and claims could be made against them
- Any other deceptive, abusive, or coercive practice to avoid full payment of a claim
Before bringing a lawsuit for bad faith claims, there are statutory procedures under the Texas Insurance Code that must be followed to give notice to an insurance company or adjuster and an opportunity to right their own wrongs. The procedures in Texas also vary somewhat depending on whether the cause of damage was weather-related or something else. It is very important then to have an experienced litigation attorney involved to ensure compliance with all the technical requirements in order to perfect your right to a bad faith claim and potentially increased award.
If the insurance company denied your claim for a settlement due to property damage or loss, you may have a right to pursue damages in court and recover a multiplied award. In Texas, when an insurance company wrongfully denies property damage or loss benefits under a policy, the insured may recover for breach of contract and, if there is bad faith or deceptive conduct, recover also under the Texas Insurance Code, Deceptive Trade Practices Act (DTPA), or pursuant to common law for breach of the implied duty of good faith and fair dealing.
As the insured, you do not need to show an injury beyond a loss of policy benefits, but you can in certain instances recover also for any “independent injury” even beyond the policy terms if it resulted from the company’s bad faith misconduct. That can include lost profits, loss of income, and damaged credit reputation even if the insurance policy did not otherwise provide for such business interruption losses or limited them to an amount less than that actually suffered. Plaintiffs in a first-party property damage or loss claim may also recover for mental anguish if it is shown the insurance company acted knowingly or intentionally to violate the law, with the statute providing for “up to three times” damages (or treble damages) as an additional recovery on the same basis. A prevailing plaintiff is entitled to recover reasonable attorney’s fees also, court costs, and certain expenses in addition to the higher statutory interest at a rate of 18% (or 10% for certain weather-related claims) for a failure to promptly decide and pay a valid claim. That may be true even if the insurance company ultimately pays an entire award decided by a pre-suit appraisal or during litigation.
Contact a McKinney, Texas, First-Party Property Damage Attorney Today
It is essential to know your rights when an insurance company fails to properly decide your first-party property damage or loss claim. Wright Commercial Litigation has an in-depth understanding of insurance claims that can help you efficiently navigate the complicated language and statutes to take all necessary steps to recover in full on your insurance claim. If you have already been denied coverage or were underpaid for reasons that you suspect are illegitimate, unfair, or not in good faith, then contact the firm here to request a free initial consultation to discuss the possibility of recovering multiplied damages due to your insurer’s bad faith misconduct.
Wright Commercial Litigation, located in McKinney, Texas, assists residents of Dallas, Fort Worth, Collin County, Dallas County, and Denton County with their first-party property damage and insurance legal needs.