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Dawson and Rosenthal
Dawson and Rosenthal

San Diego Underpayment of Claims

California law requires insurance companies to conduct themselves appropriately and execute good faith dealing with regard to processing and evaluating claims. An insurer must look for reasons to approve coverage and put the best interests of an insured’s above its own. Unfortunately, companies continue to prioritize profits over customer need, which is a practice called insurance bad faith. One of the most common ways of doing this is by underpaying valid claims. If you believe you’ve been the victim of a “lowball settlement,” the San Diego attorneys at Dawson & Rosenthal, P.C. can help. Contact us today to schedule a free initial consultation with our firm today.

Common Causes of Underpayment of Claims

Underpaying insurance claims serves as a revenue stream for many insurance companies. By cutting small amounts of claims from many policyholders, insurance companies stand to make even more money –at the expense of policyholders who need the benefits most. An underpayment of a claim is more than simply inconvenient; it poses an undue financial hardship on the insured.

An insurance company may employ several tactics in an attempt to underpay claims. Examples of common reasons for underpayment include:

  • Citing an unreasonable depreciation of a covered asset; for example, a vehicle or a home.
  • Quoting unreasonable percentages for overhead.
  • Using outdated or misrepresented price lists for evaluating the costs of new constructions or replacement.
  • Using a faulty basis for calculating business losses.
  • Failing to accurately price specialty items.
  • Invoking the rule of comparative negligence without any evidence of liability.

An insurance carrier might eventually pay a claim in full after a fight, but delaying the process still has benefits to the company. For example, an insurance company might withhold full payment of a claim to earn interest and delay the need to report the payment. They count on the fact that people will be happy for an eventual payout because they are unaware of their rights to assert fair payment in court.

What to Do After Underpayment

An underpayment is more common than most people think, for the reasons outlined above. Any person who suspects an underpayment should take certain steps to protect his or her claim:

  • Get it in writing. Demand an explanation for the underpayment. All claimants have the right to understand from where a valuation is derived.
  • Document everything. Save all documentation from the insurance company, including copies of correspondence and any itemized lists.
  • Ask for a second review. All policyholders also have the right to file an appeal.
  • Contact an attorney. Sometimes getting legal representation involved is the best way to make insurance companies take a claim seriously. The attorneys at Dawson & Rosenthal, P.C. have more than 50 years of experience in insurance bad faith law, and they can readily identify underpayment. Contact us today to explore your legal options.

When Can a Company Be Liable for Underpayment?

An insurance company can be liable for underpayment when that underpayment results in bad faith. A bad faith action typically results when an insurance company puts its own interests above those of the policyholder. The act of prioritizing profit over fair payment of a claim is a classic example of insurance bad faith.

When an insurance company acts in bad faith, it can be liable for any damages that result. This includes payment not only of the remainder of the claim but also accrued interest and compensation for attorney’s fees. Insurance companies may also have to pay punitive damages, which serve as punishment and discourage similar behavior in the future.

Insurance companies are required to act in good faith to their customers, catering to their best interests and finding reasons to grant coverage whenever possible. Failure to do so, through methods like underpayment, is against the law. If you suspect your insurance company gave you a lowball offer on a claim, you have legal options. Contact the attorneys at Dawson & Rosenthal, P.C. today to schedule a free review of your legal options.