Insurance bad faith after natural disasters: What to know | H. Dennis Beaver

The recent wildfires in Southern California and natural disasters elsewhere in the country have left thousands of people grappling with enormous loss — and the complex insurance claims process that follows.

Insurance companies owe a duty of good faith and fair dealing with policyholders.

Unfortunately, some carriers use unfair, manipulative and deceptive practices to delay, deny or minimize payouts of valid claims. This is known as insurance bad faith — and it is crucial to be on the lookout for these tactics.

While I do not recommend immediately hiring an attorney, under some circumstances — such as when bad-faith is suspected — there is no choice.

It never hurts to schedule a consultation at the very beginning, as a lawyer can help clarify your insurance coverages and be ready to help if it turns out that your carrier isn't playing by the rules.

But as I stated in an earlier column, unless your carrier has flat out denied the loss or you suspect bad faith, allow the claims process to proceed and do not rush to retain an attorney, as the expense might not yet be justifiable.

I spoke with Los Angeles attorney Shant Karnikian, managing partner and trial attorney with one of our country's leading bad-faith law firms, Kabateck LLP. He addressed the following important points for how to proceed with an insurance claim and avoid common pitfalls.

Get a copy of your policy. Whatever renters or homeowners insurance you have, contact your carrier to obtain a copy of the complete policy. Review it in detail to ensure you understand your coverage limits, deductibles and specific provisions related to the damage. Don't forget to check other relevant policies, such as auto insurance or umbrella insurance.Document everything. When you can visit your home, take photos and videos of all the damage. You may need professional help, such as appraisers and structural engineers, to assess the full extent of the damage. An attorney can help connect you with the proper experts if necessary, but don't be in a hurry to incur avoidable expenses. Allow the claims adjusters to do their work. Businesses should document all business losses and interruptions related to the incident. Save all receipts. You'll need proof of whatever expenses you incur related to the disaster.Keep a diary. Take detailed notes and save records of every interaction with your insurer — letters, emails, calls, phone numbers, dates and times, names of the representatives you've spoken with and so on.Obtain temporary housing. Most homeowners/renters policies cover a period of additional living expenses (ALE) for housing while you are displaced.Follow proof of loss requirements. Many insurance policies have strict policies and timeframes for reporting damage and filing claims. Stay on top of your insurance company. Follow up on a regular basis to verify your claim is being processed and that you have completed the requirements and provided all necessary information.Don't jump at their first offer. Do not feel pressured to accept an initial assessment or lowball offer, especially if you have not obtained a second opinion on valuation. Do not sign a release when accepting periodic payments.Don't rush into contracts. Don't sign contracts for repairs, rebuilds, clean-up/debris removal and so forth before you know the status of your claim.Inquire about resources. You may qualify for assistance through FEMA and/or the Small Business Administration (SBA).

Consulting with an attorney

Seeking advice early in the process from an attorney experienced with property losses — before filing your claim — is advisable, but ethical lawyers will not rush to sign you up unless it becomes clear that you are being dealt with improperly.

How to recognize bad-faith

Karnikian points out that bad faith comes in many forms, including:

Failure to respond to a claim promptly Refusal to communicateLack of reasonable standards for prompt investigation or processing of a claimFailing to conduct a fair investigationRequiring unreasonable proof of a loss Misrepresenting terms and policy provisionsDenying policy benefits without a clear or valid explanationNondisclosure of limitations or exclusions when the policy was sold.Failure to approve or deny a claim in a reasonable time period after the loss is submittedPressuring policyholders to accept a low-ball offer Forcing the insured to litigate the claim because the insurer refuses to make an adequate settlement offerAdvising policyholders against retaining a lawyer

If you believe your insurer is using bad-faith tactics to resist paying a valid claim, you can file a complaint with your state's Department of Insurance, which will conduct an investigation and has the authority to impose penalties and fines on companies for violations.

A successful claim — negotiated by an attorney — can help you gain compensation for:

- Contract damages. The amount of wrongfully denied benefits, plus interest in addition to significant economic losses, as well as mental and emotional distress caused by your insurance company's failure to fulfill its contractual obligations, including attorney fees.

Punitive damages can be awarded to punish the at-fault party.

"Lawyers who care will try every way possible to keep their clients out of court," Karnikian says. "We are here to listen and help."