Insurance acts as a contract between a policyholder and the insurance carrier, where the carrier is obligated to reimburse the policyholder for losses suffered. Of course, policyholders must have the right policy if they expect compensation for their claims. For instance, an auto insurance policy can’t cover storm damage to a home.
But even among home insurance policies, several types of coverage sound like they do the same thing. Sewer backup insurance and overland flood insurance cover water damage. But each of these policies triggers during different, specific circumstances. Homeowners might also have coverage from two or more insurers – from a private insurer and through the federal National Flood Insurance Program (NFIP), as an example – whose policies seemingly overlap.
If you have multiple coverage options for your home, it’s possible that once you file a claim, your insurer will deny settling your claim, saying other coverage can pay for it. Is your insurer allowed to do something like this?
Texas law against unfair settlements
Under Texas law, an insurer is engaged in unfair or deceptive business if it refuses, fails or unreasonably delays a settlement offer because it claims other coverage may be available. Insurers must also conduct a reasonable investigation into a policyholder’s claim before explaining why they are turning down a claim.
Is passing off coverage considered bad faith?
Bad faith insurance refers to any actions your insurer can do to avoid its contractual obligations to you. Passing off coverage or claiming that another insurer can pay for the claim is an act of bad faith.
Your insurer can’t deny your claims because other coverage or policies can pay for it. The carrier also must conduct a thorough assessment of your property before it can reach any decision on your claim. If your insurer engages in these unscrupulous practices, consider filing a lawsuit with the help of lawyers with bad faith insurance experience.