When Claims Handling Comes Under Scrutiny
Recent court decisions and lawsuits are putting renewed attention on how insurers evaluate property claims — and on how much of that process a policyholder is entitled to see.
Alabama: a $5,000 gap, and a fight over the file
In Alabama, homeowners sued State Farm after the carrier allegedly offered $4,059.10 on roof damage their contractor estimated at $9,112.02. The dispute later expanded into discovery over State Farm's internal claims-handling materials. The Alabama Supreme Court allowed limited sharing of protected materials among several similar cases, while preserving safeguards for confidential and trade-secret information.
The dollar gap is not the interesting part. A carrier is entitled to reach a different figure than a contractor. What matters is whether the scope, the pricing and the reasoning behind that figure can be explained — and whether the policyholder ever gets to see how the number was built.
Eighth Circuit: a mistake is not automatically bad faith
The other side of the ledger matters just as much. In a recent decision involving USAA, the Eighth Circuit concluded that the carrier's claim-handling errors were exactly that — errors — and did not rise to bad faith.
That holding is worth sitting with. Bad faith is a high bar in most states, and it should be. A wrong estimate is not a tort. A delay is not automatically punitive. Policyholders who assume every underpayment is actionable tend to be disappointed, and the assumption pulls attention away from the more productive work: proving the correct number.
Texas: who changed the estimate, and why?
In Texas, Galveston homeowners have filed a federal lawsuit alleging that Hurricane Beryl estimates prepared after field inspections were later reduced substantially — in one instance from roughly $91,000 to about $31,000. The suit is pled as a racketeering claim against the Texas Windstorm Insurance Association. The allegations have not been proven.
But the question behind them is one nearly every adjuster on the policyholder side has asked: the field adjuster walked the roof, wrote the scope, and a different number came out the other end. Who changed it, and on what basis?
Good faith is structural, not moral
It is tempting to treat good-faith claims handling as a question of right and wrong. It is more useful to treat it as structural. The duty of good faith is the foundation of the insurance contract itself — the policyholder pays premium up front and receives, in return, a promise to be evaluated fairly at the moment of loss.
How that promise gets carried out varies. Does the state require an on-site inspection by a licensed adjuster, or is a mitigation contractor's report sufficient? What grounds, outside the policy's own conditions, can support a reduction in payment? At what point does a procedural shortcut — or an outright limitation on payment — stop being sloppiness and start being something a court will call bad faith?
Those lines are drawn differently in every jurisdiction. The test the carrier's file has to survive is the same everywhere: can the decision be explained, in writing, by reference to the policy, the scope and the pricing?
What this means for an open claim
Not every underpayment, delay or mistake is bad faith. But every claim decision should be supportable.
When a carrier's estimate differs materially from the actual scope and cost of repair, the policyholder is entitled to understand what was included, what was excluded, and the basis for those decisions.
At Berger Adjusters, we identify the full scope of damage, document the cost to repair it, and compare that documentation line by line against the carrier's position. The goal is not to turn every disagreement into litigation. It is to make sure the claim is documented well enough that material differences surface — and get resolved — during the adjustment, rather than years later in discovery.