Bad Faith and Canceled Policies
While insurance companies do have certain rights when canceling a policy, they also have duties owed to the consumer and must follow the terms of the agreement in order to act in good faith. If your insurer has canceled your policy without providing you a written communication explaining their reasoning, then you should immediately contact a bad faith insurance law firm to ensure that you have the proper representation to get what is properly owed to you.
When CAN an insurance company terminate a policy contact?
In order to effectively understand when an insurer is acting in bad faith, it is important to first recognize when they DO have the right to cancel a policy.
First and foremost, it is vital that you as the policyholder always read the contract you are signing, or obtain assistance from an experienced lawyer to help you understand the provisions of the policy. It is your responsibility as the consumer to be as informed as possible.
Depending on the provisions of the contract, most insurance companies are usually allowed to cancel a policy within the first 60 days. During this period, the insurer has more leeway when it comes to reneging on the policy.
Some of the legitimate reasons an insurance agency can cancel your policy include:
- Failure to pay insurance premiums by the due date
- Discovery that the insurance policy was obtained through fraud or dishonest documentation
- The insurance company finds you to be at risk
If your insurer is legitimately able to uncover faults and conditions that make you ineligible for coverage, then they must send you a written notice explaining their reasons for canceling.
This initial cancellation can be repealed and should be done so if you believe that their arguments are invalid.
What must the explanation say?
Your insurer is not allowed to simply cancel your policy for no reason nor without explaining why.
The Texas Insurance Code sets the legal standard for how insurance companies must go about canceling a policy and sets the requirements for the written statement that must be provided to you, including:
- An insurer’s written statement giving the reasons for the declination, cancellation, or nonrenewal of an insurance policy must fully explain a decision that adversely affects an applicant for insurance or a policyholder by denying the applicant or policyholder insurance coverage or continued coverage.
- The statement must:
- State the precise incident, circumstance, or risk factors applicable to the applicant for insurance or the policyholder that violates any applicable guidelines;
- State the source of information on which the insurer relied regarding the incident, circumstance, or risk factors; and
- Specify any other information considered relevant by the commissioner.
When is it bad faith cancellation?
Bad faith cancellation can occur through a number of methods including:
- Rescission—Also known as “post-claim” underwriting, this often occurs after a claim has been made to avoid paying for damages. This essentially means that the policy has been retroactively canceled and the insurer will return your premium money and renege on your coverage.
- Cancellation—The termination of a policy prior to the date of expiration for unsubstantiated reasons.
- Non-renewal—Policy is cancelled at the time of expiration.
If your insurer has acted in such a manner under no reasonable proof, then you may be the victim of bad faith insurance policy cancellation.
Unfortunately, post-claim underwriting is often seen following an insurance claim. This is a transparent attempt to avoid paying out what is rightfully owed to the insured and will often lead to the victim carrying the financial burden of the loss.
Did you regularly pay your premiums and hold up your end of the contract? If your insurer is trying to argue that your policy is canceled, you don’t have to go at it alone. Millin & Millin is here to guide you when you most need our legal assistance.
Sadly, some insurance companies are going to attempt to act in bad faith in order to keep as much money as possible. If you have made an insurance claim after a disastrous event and your insurer is attempting to claim your policy was canceled, don’t just accept it, fight back with Millin & Millin.
Our bad faith insurance lawyers have advocated for McAllen metro residents who have had to deal with bad faith insurance tactics. Our attorneys possess superior experience and the necessary knowledge to bring forth an exceptional case.
Contact us at (956) 631-5600 for a free consultation.