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Is a low water damage claim settlement bad faith insurance?
December 28, 2022
Property owners in California often carry multiple different kinds of insurance. The standard homeowner’s policy may not adequately protect against unique risks, so people purchase multiple kinds of supplemental insurance along with basic homeowners insurance coverage.
Water damage coverage is a common kind of supplemental insurance. After all, issues ranging from municipal system failures to unpredictable weather patterns could cause flooding and water damage to your home that costs tens of thousands of dollars to correct.
When you carry water damage insurance, you naturally expect that policy will pay for the repairs to your property. What happens if you accept the settlement that turns out to be far lower than the actual damage costs?
The insurance adjusters offer settlements for a reason
When you hear horror stories about lengthy negotiations and aggressive insurance adjusters, you may worry that it will take a long time to get any money to help repair your property. When you get an immediate response offering a settlement, you might gladly accept the check offered by the insurance company.
However, after you pay for the first few bills, you quickly run out of funds. You then find yourself in a situation where you can’t get any more money from the insurance company because they claim you released them from future liability.
The possibility of settling for far less than what the policy can pay is why some insurance adjusters are readily forthcoming with a settlement check. They offer far less than what it takes to repair water damage, which is usually
$4 or more per square foot
. Is that settlement check that only covered a quarter of your total costs and represented the fraction of your total coverage an example of bad faith insurance practices?
Underpaying a claim is sometimes bad faith insurance
When an insurance company knowingly under compensates a policyholder despite them having sufficient coverage for their needs, it may have acted in bad faith. Provided that you can show that reasonable professionals would recognize that the settlement was inappropriate and that your actual losses were higher, you may be in a position to take legal action.
It is almost always a better option to counter a low settlement and secure a better offer from the insurance company than it is to attempt to litigate a bad faith insurance claim after settling. Those worried about a settlement offer may need to bring in professional help during negotiations or when preparing a bad faith insurance claim.