Whether you live in San Diego or any area in California, dealing with your homeowners’ insurance company is never fun. It means you recently experienced some sort of issue with your house, such as damage from weather or loss from a break-in. The last thing you need during a stressful time like this is for your insurance company to give you the runaround.
According to the Insurance Information Institute, around 5% of insured homeowners make a claim each year – that’s 1 in 20. With the earthquakes and wildfires present in California, it’s important to keep properties protected.
While there are plenty of legitimate reasons why a homeowners insurance claim might not be approved, there are also instances of insurance companies acting in bad faith. Denying a valid insurance claim is illegal and extremely disheartening when you are trying to recoup losses from a disaster.
Is The Claim Legitimate?
Before getting all up in arms at your insurance company, make sure there isn’t a valid reason that your homeowners’ claim was denied. Every type of insurance differs, so you will need to look at your individual policy to see if all rules were followed. Some of the legitimate reasons an insurance claim may be denied include:
- The claim was filed too late. With any home insurance policy, there will be a time limit on how long after the incident you can file a claim.
- Monthly payments weren’t made. There is a grace period to pay your bill, but when that runs out, you will no longer be covered by your policy. Grace periods usually range from 24 hours to 30 days.
- Material misrepresentation. This means that you failed to disclose pertinent information about your coverage and have therefore invalidated the policy. For example, if you own a pet and withheld this information from the insurance company, you may have your claim denied.
- The situation is not covered. Your policy will be very specific about the situations that it covers. Anything else slightly outside of those parameters is not the insurance company’s responsibility.
- Lack of evidence. You will need to submit proof of your claim, for example, copies of home damage repair bills. If sufficient evidence can’t be provided, there’s not much that can be done.
If one of these reasons applies, there may be nothing you can do about your denied claim. If your claim is valid, however, it is your right to make sure the insurance company holds up its end of the bargain. You make insurance premiums every month so that your home is covered in emergency situations, and you deserve what you were promised.
Duty of Good Faith
Insurance companies are held to a “duty of good faith,” meaning that they are expected to do the right thing. It is a principle used for insurance contracts that legally binds both parties to act honestly. One key point is that both parties are held responsible, so if a person withholds pertinent information from their insurance company, they have failed to act in good faith.
The main components of the good faith principle include:
- Conduct a Reasonable Investigation. It is the responsibility of the insurance company to promptly and thoroughly investigate every claim.
- Equitable Consideration. Every person and situation must be considered equally important to the company’s financial interests.
- Fair Application of Policy Terms. The policy terms must be upheld according to the contract.
- Pay Valid Claims (Promptly). Any valid claims must be paid the full amount promised and in a timely fashion.
If your home insurance company fails to uphold these good faith principles, they will be considered to be acting in bad faith. Check with an attorney; this may be illegal and punishable in court.
Bad Faith Insurance
When an insurance company does not follow through on their end of the policy, it is called “acting in bad faith.” There are many ways in which an insurance company might act in bad faith. Some examples of bad faith include:
- Denying a valid claim without explanation
- Delaying payment on a valid claim without explanation
- Ceasing communication
- Failing to pay you the full amount of compensation
- Changing or terminating your policy
- Trying to convince you to accept a smaller payout
These are just some of the ways in which an insurance company may prioritize its own profits over what’s best for the customer. You may feel like the insurance company is too big of an enemy to fight, but don’t give up just yet.
Holding Them Accountable
It can seem daunting to try and hold your insurance company liable, but there are lawyers to help. Attorneys who specialize in insurance disputes can help determine whether or not the situation qualifies as bad faith. Perhaps there was simply a miscommunication with the insurance company. If it does qualify as bad faith, your lawyer will take you through the process of filing a claim against your insurance company. If all goes well, the home insurance company will be held responsible for damages and be forced to pay up.
The main damage to be recovered in a case of bad faith is the amount of compensation originally guaranteed in the relevant insurance policy. In addition to getting what you deserve, the insurance company may be held further liable and be required to pay for your attorney’s fees or lost wages. If their bad faith acts are deemed particularly harmful, they could even receive punitive damages, depending on the state. This usually involves charging the insurance company additional fines to deter them from conducting future bad-faith acts.
Actionable Items
If you are in the middle of a homeowners claim or about to file one, here are some tips for making the process as smooth as possible:
- Document Everything. From the moment the incident occurs, start documenting. The more photos, recordings, and notes you have, the better. This includes documenting every instance of communication with the insurance company. Get everything in writing.
- Request Documentation from the Adjuster. If the insurance adjuster contacts you, ask them to send you an explanation of their decision in writing.
- File a Complaint with the State. In most cases, you can file a complaint directly with your state. In California, you can file a consumer complaint online with the Department of Insurance.
- Contact an Attorney. Bad faith is a complex area of law. For example, you will need to determine whether the case is a breach of contract or a tort because this affects the statute of limitations. An experienced bad-faith attorney will be key in making the process smooth and easy.
Is It Worth the Cost?
It is normal to feel overwhelmed when considering any sort of legal action. Most people assume that lawyers are ridiculously expensive and only worth hiring for extreme circumstances. What many fail to realize is that most attorneys work on a contingent fee basis. This means that you don’t pay the lawyer unless they win your case. If they do win, they get paid a percentage of your recovered compensation. Again, many people balk at the large percentage, but it has been shown that claims filed by an attorney usually recover more lost damages than claims made without one.
Not only will the contingency fee model help with any money concerns, but seeking justice for the wrongdoing of your insurance company is extremely satisfying in its own right. No person should be taken advantage of by a corporation without being able to fight fairly for what they deserve, especially when it comes to your home.
Lastly, if you are thinking of buying or selling a house in San Diego, contact the McT Real Estate Group. We are happy to have a conversation and put a plan of action together that fits your real estate needs.