Homeowners and business owners are forced to put a tremendous amount of faith into the hands of their property insurance company. You pay your premiums on time—and in turn, you have the fair and reasonable expectation that your benefits will be paid out when you need them. Insurance companies have a responsibility to use good faith settlement practices.
You may be wondering: Can you get punitive damages as part of a bad faith lawsuit? While these cases are handled on a state-by-state basis, the answer in most jurisdictions is “yes.” Here, our New Orleans bad faith insurance attorney provides an overview of the key things to know about getting compensation for punitive damages in a bad faith lawsuit.
What are Bad Faith Insurance Laws?
When you purchase a homeowners insurance policy, you expect your insurer to handle claims fairly, promptly, and in accordance with the policy terms. Unfortunately, some insurance companies use bad faith practices—from unfairly delaying claims to wrongly denying payment. Homeowners and property insurance companies have a general responsibility to use good faith settlement practices. There are laws in place—which vary by state—that allow policyholders to hold insurance companies legally liable for damages caused by bad faith settlement practices.
In Louisiana, bad faith insurance claims are governed broadly by R.S. Tit. 22, § 1973. If an insurer unreasonably denies, delays, or undervalues a valid homeowners insurance claim, they may be held liable for bad faith practices. Louisiana law specifically prohibits insurance companies from misrepresenting policy provisions, failing to pay a claim within 30 days after receiving satisfactory proof of loss, or compelling policyholders to accept unfair settlements.
When Can I File a Bad Faith Lawsuit?
You can file a bad faith lawsuit against an insurance company if you were subject to bad faith practices as part of the claims process. State laws generally put obligations on insurance companies to act in good faith and fairly process claims. If they fail to live up to that standard, they may be legally liable. Bad faith insurance practices in homeowners claim and commercial property insurance claims can come in a wide range of different forms. Some examples include:
- Unreasonable delays in the investigation
- An unfair, wholly biased investigation
- Failure to communicate with the policyholder
- Unnecessary requests for additional documentation
- Unreasonable lowball settlement offer
- Unfair denial of property insurance benefits
Understanding Bad Faith Damages
You have the right to seek financial compensation for a wide range of damages as part of a bad faith insurance claim in Louisiana or elsewhere in the Gulf Coast region. A top-tier New Orleans property insurance attorney can help you seek compensation for the maximum value of your bad faith damages. Along with other types of losses, you may be entitled to recover for:
- Compensatory Damages: All bad faith insurance claims start with compensatory damages. Indeed, these damages are the fundamental foundation of the claim. You can pursue compensation for the full value of the original amount owed under the policy that the insurer refused or delayed paying. Beyond that, you can also seek compensatory damages for additional costs. For example, if the delay in payment caused additional property damage—such as mold growth due to a delayed water damage claim—your insurer may be responsible for these increased costs. Further, you could also be entitled to compensation for the costs of the additional living expenses you were forced to pay due to the bad faith.
- Emotional Distress/Mental Anguish: Bad faith insurance claims are stressful. Being subject to an insurer’s bad faith practices is a violation of your rights. If an insurance company’s bad faith tactics cause significant stress, anxiety, or hardship, policyholders may recover damages for emotional distress. A New Orleans bad faith insurance lawyer can help you prepare to seek the maximum compensation for emotional distress damages.
- Attorneys Fees and Other Legal Costs: Through a bad faith claim, you can also seek compensation for any legal costs that you had to pay that were related to the bad faith delay or denial. Louisiana law allows policyholders to recover attorney’s fees and court costs associated with pursuing a bad faith lawsuit. Other states have similar laws for bad faith insurance claims.
- 50 Percent Additional Damages in Louisiana: Notably, Louisiana law has a special provision to allow policyholders to increase their recovery in a bad faith claim. When an insurance company is found to have acted in bad faith, Louisiana law allows policyholders to recover penalties beyond their original claim. This can include an additional 50 percent of the claim amount or $1,000—whichever is greater. In other words, you can increase the value of your claim by 50 percent in Louisiana if you can prove that the insurance company caused you harm through bad faith settlement practices.
Punitive Damages Insurance: A General Overview
Punitive damages are financial penalties awarded in lawsuits to punish a defendant for egregious misconduct and to deter similar behavior in the future. Unlike compensatory damages, which reimburse victims for actual losses, punitive damages go beyond compensation and are intended to hold wrongdoers accountable for willful, fraudulent, or reckless actions. Indeed, in some cases, an insurance company’s conduct may be deemed particularly reckless or intentionally harmful. To address the misconduct, a court may award punitive damages. As noted, these damages are designed to punish the insurer and deter future bad faith practices. Even though they are not tied to any specific loss, they are still awarded to the policyholder.
Punitive Damages are Not Awarded in Bad Faith Insurance Claims in Louisiana
Unfortunately, you cannot get punitive damages as part of a bad faith insurance claim in Louisiana. The state generally does not allow punitive damages for bad faith insurance claims unless explicitly authorized by statute. Under Louisiana law (R.S. Tit. 22, § 1973 and R.S. Tit. 22, § 1892), policyholders can seek penalties and attorney’s fees for an insurer’s bad faith actions, but punitive damages are not typically available. Instead, Louisiana imposes statutory penalties, such as 50 percent of the value of the unpaid claim.
State Law Varies On Punitive Damages: The availability of punitive damages for bad faith insurance claims varies across the Gulf Coast states. For example, in Texas, they are allowed—but can only be awarded if the insurer’s conduct is proven to be intentional, fraudulent, or grossly negligent. A similar standard applies in Mississippi, Alabama, and Florida.
We Help Policyholders Get Justice in Bad Faith Insurance Lawsuits
Facing a bad faith delay or denial from the insurance company can be stressful, frustrating, and overwhelming. You may be entitled to bad faith damages—and that could potentially include punitive compensation. At Insurance Claim HQ, we are committed to helping homeowners and property owners secure the absolute maximum available benefits—and that can include punitive compensation in some bad faith insurance cases. Our long record of case results tells the story of what we can do for victims and families. Do not go it alone: Get your free, no-obligation consultation with a top-rated New Orleans bad faith insurance attorney today.
Contact Our New Orleans Bad Faith Insurance Attorney Today
At Insurance Claim HQ, our New Orleans bad faith insurance lawyers are committed to holding the big insurance accountable for their violation of the law. We have extensive experience handling bad faith litigation. If you have any questions about seeking punitive damages through a bad faith insurance claim, please do not hesitate to contact us today for a free case review. We represent policyholders in bad faith claims in New Orleans and throughout the Gulf Coast region.
