When Does a Homeowners’ Insurance Company Act in Bad Faith?
When your insurance carrier fails to pay what it should for damage to your property, or when it agrees to pay something but not the correct amount or make the correct repairs, there is almost always a breach of contract action against the insurance company. However, many people don’t realize that an insurance company can be sued for something in addition to breach of contract: bad faith.
Bad Faith and Examples
As a general rule, insurance companies have to act in good faith towards their insureds. They have to evaluate claims timely, and while they do not have to make offers or take positions that you necessarily agree with, they do have to act reasonably under the circumstances.
When insurance companies act unreasonably, and in ways that a reasonable person or company would act, they are said to be acting in bad faith.
An example would be if your roof blew off after a hurricane. There is no argument that there was a hurricane, no doubt that the loss is covered by the terms of the insurance policy, and there is no argument that you have no roof and need a new one. Compare that with a water leak, where the source and cause of the leak may be debatable, and where the insurance company could reasonably say that it was caused by something not covered under the policy.
Another example would be if an insurance company tries to unreasonably delay repairs. For example, in our hurricane example, assume that the insurance company wanted pictures and documentation that your home had a roof on it before the hurricane happened. This would be absolutely ridiculous.
Attempts to delay paying claims by asking for unnecessary documentation, or trying to put homeowners through hoops and hurdles that are unnecessary to reasonably evaluate a claim, constitute bad faith.
Insurance companies also must fairly negotiate with homeowners, which includes the obligation to accept any fair offer made by a homeowner to settle a homeowners’ insurance dispute.
Bad Faith Laws
If a homeowner suspects bad faith, the homeowner must provide a civil remedy notice to the Florida Department of Insurance which puts the insurance company on notice that the homeowner believes there has been bad faith. If the insurance company corrects its error, there is no penalty. If the insurance company maintains its (unreasonable) position, the homeowner can sue, just as it could in any other situation. However, the homeowner must sue under the bad faith law, complying with the notice requirements of the statute.
With bad faith, the homeowner can now recover the full amount of damages, even if that amount is more than the limits of the homeowners’ insurance policy. The homeowner can also collect attorneys’ fees and costs.
If your insurance company is acting unreasonably, or denying you what your policy says you should receive, fight back. Contact the Miami property damage insurance attorneys at Velasquez & Associates P.A. today with any questions you may have.