Unfair Insurance Practices
Legitimate insurance claims are denied everyday. Sometimes claims are denied due to a misunderstanding of the situation, and providing evidence to clarify the situation and prove your case can often cause a reasonable insurance adjuster to change her mind and offer to pay your claim.
Let's say you had an auto accident at 5:00 p.m. when you were heading home from work. You file an insurance claim with your insurance company. At some point, you told the insurance adjuster that you used your car for Uber or Lyft that day. The insurance adjuster jumps at that admission and denies your claim stating that the claim is being denied because “the vehicle was being used to carry passengers for Lyft during the time of loss” and the policy does not cover losses that occur while the vehicle is “being used to carry persons for a fee.” As it turns out, you drove for Lyft or Uber at 5:00 a.m. to 7:00 a.m. before you went to work that morning, but you were not driving for them at 5:00 p.m. when you were leaving your regular job.
Maybe the insurance adjuster thought you were driving for Lyft or Uber at the time you had the accident. Or maybe the insurance adjuster was so happy to find a reason to deny your claim that she did not bother to ask whether you actually had a Lyft passenger in the car at the time of the accident. In either case, instead of giving up, you should contact a lawyer to review your situation and fight for you.
Regardless of what the insurance adjuster tells you, the insurance company is required to pay your claim if, under the terms of your policy, you are covered for the loss you experienced. Therefore, if the insurance company wrongfully denies the claim, you can sue for beach of contract. Insurance company may not care too much about this. Basically, if they owe you $10,000 and you sue to get your $10,000, it does not harm them much. But the law provides a stronger motivation for insurance companies to pay.
In addition to the general breach of contract claim, an insurance company can be sued if it fails to pay your claim when "liability has become reasonably clear". Failure to do so, opens up the company to greater liability. In our example above, the insurance company could be obligated to pay $30,000 instead of the $10,000 it initially owed. Therefore, insurance adjusters always try to seem reasonable. If the adjuster sees or hears anything that puts liability in question (e.g., you mentioned Lyft), then the adjuster may deny your claim even though your claim is in fact covered by your policy. Therefore, when your insurance company gives you a smart-sounding reason for denying the claim, they might just be trying to avoid getting hammered with additional penalties if they are sure; it does not mean you are not entitled to payment.
Note: There are other things that an insurance company cannot do, some of which are shown below. For example, an insurance company cannot lie about what your policy covers. For example, the insurance company cannot say your renter's policy does not cover fires if it does in fact cover fire damage. However, in my experience, those actions are less common. It is more likely that the insurance company will say, "yes, fires are covered, but we don't believe you lost a $2,000 TV in the fire."
Contact us now so we can evaluate your insurance case free of charge.
Texas Insurance Code Sec. 541.060. UNFAIR SETTLEMENT PRACTICES.
(a) It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to engage in the following unfair settlement practices with respect to a claim by an insured or beneficiary:
(1) misrepresenting to a claimant a material fact or policy provision relating to coverage at issue;
(2) failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of:
(A) a claim with respect to which the insurer's liability has become reasonably clear; or
(B) a claim under one portion of a policy with respect to which the insurer's liability has become reasonably clear to influence the claimant to settle another claim under another portion of the coverage unless payment under one portion of the coverage constitutes evidence of liability under another portion;
(3) failing to promptly provide to a policyholder a reasonable explanation of the basis in the policy, in relation to the facts or applicable law, for the insurer's denial of a claim or offer of a compromise settlement of a claim;
(4) failing within a reasonable time to:
(A) affirm or deny coverage of a claim to a policyholder; or
(B) submit a reservation of rights to a policyholder;
(5) refusing, failing, or unreasonably delaying a settlement offer under applicable first-party coverage on the basis that other coverage may be available or that third parties are responsible for the damages suffered, except as may be specifically provided in the policy;
(6) undertaking to enforce a full and final release of a claim from a policyholder when only a partial payment has been made, unless the payment is a compromise settlement of a doubtful or disputed claim;
(7) refusing to pay a claim without conducting a reasonable investigation with respect to the claim;
(8) with respect to a Texas personal automobile insurance policy, delaying or refusing settlement of a claim solely because there is other insurance of a different kind available to satisfy all or part of the loss forming the basis of that claim; or
(9) requiring a claimant as a condition of settling a claim to produce the claimant's federal income tax returns for examination or investigation by the person unless:
(A) a court orders the claimant to produce those tax returns;
(B) the claim involves a fire loss; or
(C) the claim involves lost profits or income.
(b) Subsection (a) does not provide a cause of action to a third party asserting one or more claims against an insured covered under a liability insurance policy.
Texas Insurance Code Sec. 541.061. MISREPRESENTATION OF INSURANCE POLICY.
It is an unfair method of competition or an unfair or deceptive act or practice in the business of insurance to misrepresent an insurance policy by:
(1) making an untrue statement of material fact;
(2) failing to state a material fact necessary to make other statements made not misleading, considering the circumstances under which the statements were made;
(3) making a statement in a manner that would mislead a reasonably prudent person to a false conclusion of a material fact;
(4) making a material misstatement of law; or
(5) failing to disclose a matter required by law to be disclosed, including failing to make a disclosure in accordance with another provision of this code.