Insurance companies have a legal and ethical duty to investigate and pay property damage claims promptly and fairly. However, there have been instances in which insurance companies have failed to properly pay property damage claims, resulting in financial and emotional stress for policyholders.
One example ofthis occurred in 2017, when State Farm was found to have engaged in bad faith practices in its handling of Hurricane Katrina claims. Afederal judge ruledthat State Farm had used "fraudulent conduct" and had "manipulated the claims process" to avoid paying policyholders for damages caused by the hurricane. The judge ordered State Farm to pay $250 million in damages to the policyholders. This case serves as an example of an insurance company failing to properly pay claims and engaging in bad faith practices.
Another example is Allstate Insurance Company, which was accused of using "boilerplate" denials for claims related to damage caused by Superstorm Sandy in 2012. The New York State Department of Financial Services found that Allstate had "systemically undervalued" damage claims from the storm and had used a "computer program" to generate "form denial letters" for many claims. As a result, Allstate was ordered to pay $12 million in fines and restitution, and it agreed to a comprehensive settlement with the state of New York.
In another example, Farmers Insurance was accused of using a software program to systematically undervalue claims related to hail and wind damage. A class-action lawsuit was filed against the company in 2019, alleging that the software program, known as "Xactimate," was programmed to undervalue claims by as much as 30%. The lawsuit also alleged that Farmers had trained its adjusters to use the software in a way that would minimize the value of claims.
These examples serve as a reminder that insurance companies have a legal and ethical duty to investigate and pay property damage claims promptly and fairly. Policyholders who have experienced property damage should be aware oftheir rights and should take steps to protect themselves against bad faith practices. If an insurance company is not properly paying a claim, policyholders may want to consider hiring a public adjuster to ensure that they receive the maximum payout for their claim and to have an expert on their side during the claims process.
It's important tonote that these are examples of allegations and lawsuits, and the court's final decision may vary. In any case, it's important for policyholders to be aware of their rights and to take the necessary steps to protect themselves against bad faith practices from insurance companies. Policyholders should also report any suspicious behavior or misconduct from insurance companies to the appropriate state regulatory body.