FindLaw KnowledgeBasePublished: 2012-10-19
When you purchase insurance and pay your premiums every month, you expect that the insurance company will uphold its end of the bargain when a loss occurs. Unfortunately, this isn’t always the case. Like all businesses, insurance companies are concerned about protecting their bottom lines. Sometimes, they try to save money by wrongfully denying valid claims.
When it comes to dealing with insurance companies, small injustices happen every day. However, when a big event hits, it is much easier for insurance bad faith to be brought into the light.
As a case in point, State Farm is under fire for its handling of roof damage claims stemming from Hurricane Ike in 2008. Not only is State Farm facing civil lawsuits from its insureds, but it is also the subject of a criminal investigation by the Travis County District Attorney’s office.
The inquiry stems from allegations that State Farm wrongfully denied claims stemming from “lifted shingle” damage. Lifted shingle damage happens when high winds partially tear shingles from the roof, allowing water to seep in. According legal filings, State Farm may have denied as many as 110,000 valid claims. It is estimated that the company saved up to $1 billion by refusing to pay lifted shingle damage claims.
Criminal and Civil Cases Pending
To date, at least 300 individual lawsuits and one class-action lawsuit have been filed as a result of State Farm’s Hurricane Ike roof damage denials. In addition, the Texas Department of Insurance (TDI) launched an investigation into State Farm and its Texas branch, State Farm Lloyds, in the immediate aftermath of the storm. TDI says it resolved the claims and ended the investigation in December 2010.
However, TDI may reopen its files in the wake of the Travis County District Attorney’s announcement that State Farm may soon be facing criminal charges. The DA has not disclosed the exact nature of the criminal charges it is considering. However, Texas Insurance Commissioner Elenor Kitzman sent a public letter to the Texas Legislature in September stating that “given the severity of the accusations made by the District Attorney, TDI is carefully considering its options for further regulatory action in this matter.”
In its defense, State Farm told ABC news that the insurer is cooperating with the investigation and is working with policyholders to resolve outstanding Hurricane Ike claims.
Fighting Texas Insurance Denials
An insurance policy is a contract — if the insured pays his or her premiums, the insurance company has a duty to provide the purchased coverage. When this doesn’t happen, the insured has a number of options to hold the insurance company accountable.
However, it is important to remember that the insurance company has a whole team of adjusters and attorneys whose job it is to minimize the company’s financial liabilities. As such, the insured must come into the fight well-armed with legal and factual evidence. After a wrongful denial, a Texas insurance attorney can help policyholders protect their rights.