Understanding Bad Faith Lawsuits Against Insurance Companies

What to Do When Your Insurance Company Will Not  Pay After a Fire

Tubbs. Thomas. Atlas. Lilac.

2017 was a year of fire in California. Flames tore up and down the state, burning more than 10,800 structures to the ground, claiming lives, and turning 1.2 million acres into darkened ash.[1] We Californians expect and prepare for fires, but 2017 was something altogether different. Now, as families across the state, including San Diego, struggle to recover, we rely on our insurance companies to provide us the funds to repair and rebuild. When insurance companies won’t pay (or when they drag their feet), they could be held legally liable under a concept called Bad Faith.

Insurance companies are all too happy to accept your premium payments each month, but they can turn stingy when it comes to paying out. A few bad actors will even step over the line of legality to withhold funding for deserving homeowners and property owners. If your insurance company is stringing you along or refusing to pay for fire damage, they could be acting in bad faith, which is illegal. If you can prove bad faith on the part of your insurance company, then you can seek a legal remedy and the compensation you deserve. Let’s look at what bad faith means and how you can build a case against a stingy insurance company.

Fire Fallout

The Lilac Fire that burned through northern San Diego in early December of 2017, was not the largest wildfire in California that year, but it still packed a punch. It burned 4,100 acres and destroyed 157 structures.[2].For every structure lost, many other homes and properties suffered damage, including pervasive smoke damage.

This is the exact reason homeowners and property owners carry special fire insurance policies. These owners place their faith in their insurance company to “make them whole” after a wildfire or other destructive event covered under the policy. (Note: while this article focuses on fire damage, bad faith can be applied to any type of insurance claim!)

What Is Bad Faith?

California requires that every insurance policy include an implied obligation of good faith and fair dealing. The means that an insurance company must “give at least as much consideration to the interests of the insured as it gives to its own interests.[3]” In plain English, that means the insurance company cannot try to wriggle out of its responsibility to pay a valid claim.

If a claimant believes that their insurance company is trying to get out of paying a valid claim or has denied a valid claim, the homeowner or property owner has the right to sue the insurance company for bad faith. If you’ve had a bad experience with your insurance company or are still trying to get them to pay up, keep reading. Here are the various ways an insurance company can act in bad faith.

Bad Faith in Claims Processing

Let’s say that you had to evacuate your home due to a nearby wildfire. The power was cut off in your home. When you returned three days later, you discovered that ice cream had melted in your freezer, puddled on the kitchen floor, and warped the wood. The house also smells smoky. You put in a claim with your insurance company to replace your spoiled food, fix the kitchen floor, and clean your home, including the carpeting, vents, windows, and your clothing.

The insurance provider will need to process your claim, which includes:

• Verifying your proof of loss
• Investigating the claim, which may include inspecting the site
• Determining the scope of your coverage
• Appraising the amount of the loss
• Paying or denying your claim

If the insurance company does not perform any of these steps or performs them poorly, you can claim bad faith. For example, if your insurance company appraises your losses for much less than their value, you may have a case for bad faith.

Inadequate Claims Investigation

When you make a claim, your insurance company is responsible for adequately investigating that claim. In some cases, this may be as simple as you provide pictures of the damage or even providing an estimate on the cost of lost food. For other types of damage, the insurance company may need to send out a local expert to view and asses. In the case of smoke damage, your insurance company should contract with a local company that specializes in testing for wildfire byproducts, including char, black carbon, soot, and ash.

If your insurance company inadequately investigates a claim for fails to investigate the claim altogether and then denies it, they have acted in bad faith. An example of this is that the insurance company never sends out an expert to test for smoke damage and then denies your claim.

Delay in Payment

Some bad insurance actors know that if they delay payment long enough, try to drown their customers in paperwork, or force their customers to keep jumping through hoops, a percentage of them will become frustrated and drop their claims.

It should not take an insurance company a year to investigate a fire damage claim. In fact, most claims can be wrapped up in a matter of months, if not weeks! If your insurance claim is valid and you fulfill all your obligations in filing the claim and cooperating with the investigation, then your insurer should have no grounds for unreasonable payment delays unless they are acting in bad faith.

Unreasonable Denial

Insurance companies will try to find every conceivable means to justify denying your claim. They may, for example, imply that your kitchen floor might have been previously damaged before the fire or that a slightly ambiguous sentence in your HOA’s CC&Rs means that the HOA is actually responsible for covering your damage.

Do not let your insurance company get away with an unreasonable claim denial. Fight for your rights and call them out on bad faith.

How to File a Bad Faith Lawsuit Against Your Insurance Company

If your insurance company is acting in bad faith, press for your rights. Not only do you deserve compensation so you can recover your losses and repair the damage your home or property sustained, but you also need to hold the insurance company accountable so they do not unfairly withhold payments from others.

The complex world of insurance is a specialized legal discipline. You can bet the insurance company has a whole team of lawyers waiting in the wings to argue their case, so make sure you hire a lawyer with extensive experience in insurance litigation.

Here are a few other important tips for building your case:

• Keep all documentation related to your claim, including all emails between you and your claims adjuster as well as any reports, assessments, and appraisals on your losses.
• Take lots of pictures and video of the damage.
• Take notes on all contact with your insurance company, including dates, times, the name of the person you spoke with, and the content of the conversation.
• If you have any previous assessments or appraisals of the property before it was damaged, keep it handy.

If you live in the San Diego area and believe you have a bad faith claim, contact me to schedule a consultation. I specialize in bad faith lawsuits against insurance companies and have successfully helped many San Diegans get the insurance money they were owed!

[1] https://www.washingtonpost.com/graphics/2017/national/california-wildfires-comparison/?utm_term=.5a6274833d7b

[2] http://www.latimes.com/local/lanow/la-me-sd-fire-20171216-story.html

[3] https://www.justia.com/trials-litigation/docs/caci/2300/2330.html