Knowing the difference between first-party and third-party insurance is imperative to recovering your property quickly after a large-scale disaster. Policyholders have a limited amount of time to act and, unfortunately, often find their claims delayed, underpaid, or denied without the proper recourse.
First-Party Insurance Claims
A first-party insurance claim is between the policyholder and their insurance company. Generally, most fire, flood, and other property damage claims are first-party claims. Policyholders file these claims against their own insurance companies.
An example of a first-party insurance claim would be a homeowner whose home sustains damage during a hurricane. In this case, the homeowner files a claim with the insurance company to cover the damage and compensate according to what is included in the policy.
Policyholders also have a duty to comply with reasonable insurance company requests, such as document production. Usually, if the policyholder checks all the right boxes, the insurance company must promptly pay.
If the company drags its feet or, as mentioned, cites an obscure technicality, a Houston insurance lawyer may file a bad faith claim against the company. If the policyholder establishes bad faith, the company must pay damages, at least in most cases. As a result, these claims often settle quickly.
Property insurance companies have a legal duty to pay the total insured property value (depreciation doesn’t count) after an event like:
- Fire: Frequently, the smoke that flames generate or the water that emergency responders use to put out fires do more property damage than the flames. Property insurance might also cover personal injury losses, like smoke inhalation injuries. Other times, workers’ compensation covers these losses.
- Flood: As little as three inches of water could make a room, or an entire house, unlivable. The aforementioned legal duty doesn’t allow insurance companies to provide a cheap, quick fix and walk away. They must fully restore the property, if at all possible.
- Storms: We’re quite familiar with floods in Greater Houston. Unfortunately, storms usually inflict much more damage than that. High winds topple trees, destroy roofs, and knock over power lines. The live electric wires frequently cause devastating fires. Although storms affect hundreds or thousands of homeowners, insurance companies cannot drag their feet when it comes to analyzing and paying claims.
Third-Party Insurance Claims
A third-party insurance claim is between three parties: the policyholder, the insurance company, and another individual. The claim is made by the individual, not the policyholder or insurance company. Liability claims are the most common type of third-party insurance claim. For example, if you cause a motor vehicle accident that injures another driver or passenger, the injured person can file a liability claim against your insurance company.
Almost all personal injury claims are third-party claims. The tortfeasor’s insurance company must pay the victim’s damages if a Houston personal injury attorney proves negligence, or a lack of care, by a preponderance of the evidence, or more likely than not.
This process also applies to third-party claims against another person’s homeowners or business insurance in situations like swimming pool drownings, falls, and dog bites.
Most third-party claims, like most first-party claims, settle out of court. However, the settlement process is usually longer in third-party claims. If Sam files a property damage claim against his insurance company, the company is usually motivated to settle claims it considers legitimate. It wants to keep its paying customer happy. If Tina hits Sam and Sam files a claim against Tina’s insurance company, the company usually fights the claim tooth and nail.
Incidentally, the insurance company is responsible for all costs, including legal fees, in third-party claims.
Why You May Want to Call A Lawyer
Property damage investigations must be prompt, thorough, and transparent. Usually, no matter how many policyholders were affected, insurance companies must launch investigations within about a month. Adjusters cannot rubber-stamp claims as “paid” or “denied.” Adjusters also cannot do anything behind closed doors, such as call their bosses to confirm their findings.
Insurance fraud or policyholder misconduct, such as missing a payment, terminates these obligations. If an insurance company cannot find misconduct or fraud, it often uses obscure loopholes to deny coverage. Such denials rarely hold up in court.
Catchy TV commercial jingles claim that an insurance company is “on your side” when you suffer losses. However, insurance companies only care about their bottom lines. Paying claims means losing money, and no one likes losing money. At Williams Hart & Boundas, our Houston property insurance lawyers will strongly advocate for victims to ensure maximum compensation for their losses.