What if the Insurance Company Underpaid My Claim?

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Finding out that the insurance company underpaid can be frustrating. It can make you worry and wonder what to do next.

If the insurance company underpays, there are things that you can do to fight back and pursue your rights. Our bad faith insurance lawyers explain.

Understanding Insurance Policy Underpayment

What is insurance claim underpayment?

An insurance claim is underpaid if the insurer pays less than is owed based on the losses and the coverage in the policy.


  • A person suffers $30,000 in covered losses. They have a $2,000 deductible. All the losses are covered, and the person provides the necessary documentation. However, the insurance company pays only $20,000. After the deductible, they have underpaid the claim by $8,000.

  • A victim incurs damages of $50,000. The insurance policy limit is $25,000. The insurer should pay up to the policy limit of $25,000. However, they pay only $10,000. They have underpaid the claim.

When you take out an insurance policy, you expect the company to fairly honor it if you need to make a claim. Insurance claim underpayment is when the insurer pays less than they should. They don’t deny the claim outright but pay less than you deserve.

Why do insurance companies underpay claims?

It’s simple. Insurance companies underpay claims to make a profit. They hope the insured will accept the lower amount and stop working for the full payment of their claim.

The insurance company hopes you don’t know your rights. However, you can take action if your insurance claim is underpaid. Our experienced lawyers can help.

Fighting Insurance Policy Underpayment

What can be done if a claim is underpaid? If your insurance claim is underpaid, you have several options.

Read the paperwork from the insurance company

Start by reading the paperwork that the insurance company gave you. See what reasons they gave for the payment amount. See if information is missing or if there are things you could submit to supplement the claim to receive an additional payment.

Talk to your claims adjuster

The claims adjuster may provide feedback on what you can do to increase the amount of the claim. When you speak with the insurance company representative, discuss where you are in dispute and if they would accept additional information and reconsider. If your efforts are unsuccessful, or if they are not responsive, you can proceed to internal appeals.

Escalate with internal appeals

You may be able to escalate your claim internally through the insurance company. This lets the insurance company know that you’re serious and puts the case in front of a different person. However, filing an internal appeal doesn’t stall the statute of limitations. You may still need to file a legal claim within the time deadlines.

File a legal claim

If the insurance company underpays, you may file a legal claim. The insurance company doesn’t have the final say in how much they will pay for a claim. The policy is a two-way street. The insurance company is obligated to pay the full amount of the covered claim. You may file a legal action to enforce your right to payment.

Insurance claims can be complicated. You must prove coverage and your right to compensation. Our law firm helps people get the payments they deserve from insurance claims. We can help you with your case.

How do you know if your insurance claim is underpaid?

If you’re wondering if your insurance company was underpaid or if you’re ready to enforce your right to payment, we invite you to contact our lawyers for a consultation. An experienced lawyer can review your case to assess how much payment should be made. We can discuss your right to compensation, the legal process, and how our law firm can assist you.

Contact us today to talk about your case.

Texas Insurance Claim Underpayment Laws

Is it legal for the insurance company to underpay a claim?

In short – No, it is not legal for the insurance company to underpay a claim. Underpaying a claim is a breach of contract and a violation of Texas insurance law.

Texas Insurance Code Title 5, Subtitle C, Chapter 542, Subchapter B is the Prompt Payment of Claims Act. It applies to authorized insurance companies in Texas. Once the claimant has submitted the necessary information and documentation, the insurance company has 15 days to notify the claimant of whether they are accepting or rejecting the claim. Then, if they accept the claim, they must pay within five business days. Note that in certain circumstances, the insurance company may be allowed additional time, but it is important to seek legal counsel to make sure that the insurance company has met its obligations.

An insurance policy is a contract. Failing to pay the required amount is a breach of contract on the part of the insurance company.

The Texas Prompt Payment of Claims Act states that a claim “must be paid by the insurer.” § 542.051(2)(B). Courts have interpreted this to mean paying the full amount of the claim. The insurance company cannot escape the requirements of the Act by paying a nominal amount. See Republic Underwriters Ins. v. Mex-Tex, Inc., 150 S.W.3d 423 (Tex. 2004).

When an insured makes a claim, they demand compensation for the full amount due under the policy. To underpay is to fail to pay. A reasonable payment should correspond to the amount owing. Otherwise, the insurer is in violation of the Prompt Payment of Claims Act and is subject to the applicable damages and penalties. Interest accrues only on the portion of the claim that was not paid. Hinojos v. State Farm Lloyds, 619 S.W.3d 651 (Tex. 2021). If the insurance company is liable for violating the Texas Prompt Payment of Claims Act by underpaying a claim, they may be liable for damages, statutory interest on the claimed amount, and attorney’s fees.

See also Randel v. Travelers Lloyds of Texas Insurance Company, 4:19-CD-2883 (5th Cir. 2021) (ruling that an insurer can be liable for damages for underpaying a claim even if it offers some payment and even if the payment offered is sizeable), Alvarez v. State Farm Lloyds, 601 S.W.3d 781 (Tex. 2020) (an insurer’s payment of an appraisal does not bar an underpayment claim), and Barbara Techs. Corp. v. State Farm Lloyds, 589 S.W.3d 806 (Tex. 2019) (finding that an appraisal itself is not an award of damages or an insulation from allegations of delayed payment).

Just as the insured must pay their premiums, the insurance company must honor a claim. If they underpay, they may be held accountable through a legal claim.

Lawyers for Insurance Underpayment Claims

Our team of Houston lawyers at Haun Mena handle insurance underpayment claims. Contact us to learn more and start your case.

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