Bad Faith Denial of Insurance Claims: In Wake of Bad Storms Know Your Rights


May 12, 2013

Spring is the peak season for tornadoes, and unfortunately some years Georgia is hit hard, resulting in a fair number of injuries, hundreds of lost homes and even tragic deaths.

Two years ago 11 storms ripped through the state, hitting the northwest area the hardest. The governor of Georgia declared a state of emergency in 13 Georgia counties. The recovery process for the state was slow and the costs substantial.

The Financial Storm to Follow

When storms and tornadoes sweep across the South, they bring with them insurance adjusters and insurance claims. In theory this should not be a cause of stress or concern for most people because insurance companies are supposed to protect people from catastrophic loss. Unfortunately, insurance companies sometimes value their bottom line profits above their policyholder's welfare and act in bad faith when it comes to paying claims. A bad faith claim can arise against an insurance company that improperly denies a claim, offers substantially less that the value of the claim or unreasonably delays paying a claim without a reasonable basis.

A History of Bad Faith

The largest insurer in the country, State Farm, has had many lawsuits brought against it for bad faith insurance practices. In 2006, State Farm was implicated in a bad faith insurance claim, and the lead plaintiffs were awarded $13 million in total damages when a class action suit was brought against the insurance company by a group of Oklahoma residents. In May of 1999, tornadoes struck the Oklahoma area and about 11,000 people experienced damages. The insurance company hired an engineering firm called Haag Engineering and its independent adjusters from E.A. Renfro Co. to assess the damage.

The suit alleged that Haag Engineering intentionally undervalued damage to homes and actually claimed the damage was due to other factors, like faulty construction. The jury then ruled that State Farm had in fact "recklessly disregarded" its duty to deal fairly and act in good faith with the lead plaintiffs and that it "intentionally and with malice" breached its duties as the insured's insurance company.

In another case against State Farm in 2007, a couple from Biloxi, whose house was leveled due to Hurricane Katrina, was awarded $223,000 for damages to their home. The jury also decided punitive damages were warranted and awarded the couple $2.5 million initially. The judge then decided that the award was warranted but reduced it down to $1 million.

The couple's claim indicated that their house was destroyed by a tornado during Katrina. State Farm argued that the couple's policy only covered damage from wind and not water. The insurance company took the position that the couple's home was damaged by a storm surge and that there was an exclusion in their policy that did not cover damage caused by a combination of both wind and water.

Assessing the Damages

The damages that buildings can sustain in a storm, including damage from a tornado, can be extensive. After a catastrophic storm, there are many people who begin the property damage assessment process. Homeowners, insurance adjusters, contractors, engineers, and architects may be involved in trying to assess the extent of losses.

The winds from tornadoes create forces that work all around a structure and they create vacuum like effects that peel, lift and tear away at all of the different building materials. Building components like fastening systems can get bent, pulled back, or weakened by these winds and pressure. These are subtle yet significant forms of damages that if overlooked upon conducting a damage assessment can cause a lot of problems later on down the road.

Policyholders should have the damage to their home assessed by independent and unbiased people with expertise in the areas of damages involved; select people who will have your interest at heart. While insurance companies are supposed to be there to support policyholders when faced with this type of loss, unfortunately sometimes they view their bottom line as more important than your long-term welfare.

Insurance Law in Georgia

There are bad faith statutes that exist in the state of Georgia that help keep insurance companies honest and enable you to bring a claim under certain circumstances. In some situations they permit the recovery of punitive damages, which a policyholder would not be allowed to recover in a breach of contract claim. A policyholder may also recover for attorney fees. Although insurance companies have a fiduciary relationship to their insured and are obligated to give as much consideration to the interest of policyholders as their own financial interests, sometimes this does not occur. An important part of this fiduciary relationship is that insurance companies are supposed to search for a basis to pay a claim rather than a loophole to deny the claim.

If you have suffered storm damage to your property and believe that your insurance company is being unreasonable and acting in bad faith, you need to act promptly to protect your claim. If the insurance company has not paid your claim within 60 days of submitting the claim, you should send a letter via certified mail with return receipt requested demanding that they pay the claim. The letter should also request that the insurance company explain the reason for any delay or denial of the claim and indicate the policy provision that the insurance company believes supports denial of the claim.

At Montlick & Associates, we have been helping people get the compensation they deserve for 30 years.  If you have faithfully paid your premiums, you have a right to expect your insurance company to live up to its contractual obligations if you need to make a claim. Montlick & Associates' Georgia bad faith insurance attorneys are available to assist clients throughout all of Georgia, including but not limited to Albany, Athens, Atlanta, Augusta, Columbus, Gainesville, Macon, Marietta, Rome, Roswell, Savannah, Smyrna, Valdosta, Warner Robins and all smaller cities and rural areas in the state. Call us today for your free consultation at 1-800-LAW-NEED (1-800-529-6333), or visit us on the web at www.montlick.com. No matter where you are in Georgia, we are just a phone call away and we will even come to you.

Category: Personal Injury

Please Note:
Many of our blog articles discuss the law. All information provided about the law is very general in nature and should not be relied upon as legal advice. Every situation is different, and should be analyzed by a lawyer who can provide individualized advice based on the facts involved in your unique situation, and a consideration of all of the nuances of the statutes and case law that apply at the time.