When can you sue an insurance agent over flood insurance?

Tens of thousands of people were displaced in the wake of Hurricane Harvey. The damages from flooding are set to reach $180 billion, and FEMA is responding to three other federally declared disaster areas. Homeowners with flood insurance have steadily been decreasing across Texas, and the latest figures show less than 20 percent of the homes hit hardest by Hurricane Harvey had coverage.

That figure suggests that over 80 percent of homeowners with flood damage are uninsured. The Red Cross, private donations, and federal aid are pouring into the state, but only time will tell how well the recovery goes.

Why didn’t more people have flood insurance?

The law compels homeowners in a 100-year floodplain to carry flood insurance, but only if the mortgage is federally backed or a private lender specifically demands it. Flood insurance is provided only through the National Flood Insurance Program, and many critics describe it as “outdated” and going bankrupt. 500-Year floodplains are areas that experts predict have a 0.2-percent chance of flooding any given year. In the past three years, three 500-year floods have struck the Houston area alone. Those floods damaged unsuspecting homes and businesses that were uninsured because the risk was predicted to be so small.

As these major flooding events appear to happen more frequently, many people want to blame their insurance agent for lacking proper flood insurance. After all, the Texas Supreme Court issued a mandate protecting policyholders from bad-faith insurance claims, requiring insurance agents to do their best to help the insured in a fair and timely manner.

But does that apply to an insurance agent’s failure to offer a specific policy?

Ultimately, that question is dependent on the specific details of each individual case. Texas law established that an insurance provider has the duty to provide the insured with all the options they believe are prudent, using reasonable diligence, and informing the policyholder promptly if otherwise unable to do so.

The insurance provider must obtain all policies requested by the insured, and cannot be held liable for policies that were never requested. If a policyholder is unaware of what their policy covers and does not cover, the courts hold the insured responsible, not the policy provider. Insurance providers are required by law to review specific coverage options with the policyholder, and questions are a good thing to ask.

When are insurance agents responsible for a lack of coverage, resulting in a potential lawsuit against the insurance provider?

The law protects policyholders when an insurance agent deceptively persuades the policyholder to rely on their performance to obtain the necessary policies, and the policyholder believes that they were covered from the threat that caused the loss. The focus of this argument is on the specific actions of the insurance agent when they signed the policyholder to coverage and the policyholder’s misunderstanding due to deception.

Insurance agents that claim they will obtain a specific type of coverage for the insured can be held liable if they fail to do so. If the agent represents to the client that they will procure a specific policy, and is unable to do so, they must promptly inform the policyholder that they do not qualify. Additionally, an insurance provider cannot falsify the denial of coverage when in fact, the policyholder does qualify for a specific type of insurance.

Another example that could result in legal action against the insurance provider is if a policy is set to expire, but the policyholder is never informed. Floodplains that change over time are updated by the National Flood Insurance Program, and insurance providers have a responsibility to inform the insured of any expirations to their coverage.

Hurricane Harvey ripped apart the Gulf Coast and left families struggling to recover, especially those that were not covered by insurance. The nature of insurance negligence is specific to each case, but it does happen. If you think that your insurance provider has failed to act in good faith in any way, you should consider getting legal help. Insurance policies are intentionally complicated, and it takes a skilled professional to determine if there was any wrongdoing.

Basic homeowners insurance doesn’t cover flood damages, and agents that misinform their customers are acting negligently. The process of filing insurance claims after a natural disaster can be frustrating, confusing, and even overwhelming. Many people think they are covered until disaster hits and to their horror, the insurance policy has changed. If you need help with an unfair insurance provider, Williams Hart can help.

For over 30 years, Williams Hart has been helping to defend the community from unfair business practices. Located along the Gulf Coast, our friends and families have suffered from Hurricane Harvey, and we want to see everyone recover as best they can. Contact us today for a free consultation and to see how we can help you get back on your feet.

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