Was Your Commercial Insurance Claim Underpaid?
When a business suffers a major property loss, the damage often extends far beyond the building itself. Operations may slow down or stop completely. Customers may go elsewhere. Employees may be left waiting for answers. Vendors, tenants, and lenders may all be affected.
Most business owners expect their insurance company to help them recover. Instead, many discover that the payment received falls well short of the true cost of the loss.
Unlike a denied claim, an underpaid claim is not always obvious. The carrier may issue a substantial payment, creating the impression that the claim has been resolved. It is often only after repairs begin, financial records are reviewed, or business interruption losses are calculated that the shortfall becomes clear.
At Herrera PLLC, Jonathan Herrera represents Texas business owners and commercial property owners in first-party insurance disputes involving underpaid claims, delayed payments, and bad faith insurance practices. Before becoming an attorney, he spent more than a decade handling insurance claims as an adjuster and later worked as an insurance defense attorney. That experience provides valuable insight into how insurers evaluate complex commercial losses and the methods sometimes used to reduce claim payments.
Learn more about Jonathan Herrera’s background, legal experience, and insurance industry knowledge.
Why Are Commercial Insurance Claims More Complex?
Commercial insurance claims often involve far more than the cost of repairing a building.
Many commercial policies contain multiple layers of coverage, endorsements, exclusions, and specialised provisions that affect how a claim is evaluated.
A commercial loss may involve:
- Property damage
- Business interruption losses
- Extra expense coverage
- Equipment breakdown coverage
- Ordinance and law coverage
- Tenant improvements
- Multiple insured locations
- Multiple tenants
- Contractual obligations to lenders or landlords
Some businesses also have primary, umbrella, and excess insurance policies that may respond differently depending on how the loss is classified.
As the complexity of the policy increases, so does the opportunity for mistakes, disputes, and underpayments.
How Do Commercial Insurance Claims Get Underpaid?
Commercial underpayments often occur in ways that are not immediately obvious.
Common examples include:
- Repair estimates that omit necessary work
- Incorrect pricing assumptions
- Understated business income losses
- Failure to apply ordinance and law coverage
- Improper depreciation calculations
- Misinterpretation of endorsements
- Incomplete inspections
- Incorrect application of policy limits
- Failure to recognise covered extra expenses
A carrier’s initial payment is not always the final word on what the policy requires.
Many business owners discover significant differences between the insurer’s estimate and the actual cost of restoring operations.
What About Business Income and Business Interruption Losses?
Business interruption coverage is often one of the most valuable parts of a commercial insurance policy.
When operations are interrupted by a covered loss, the policy may provide coverage for lost income and certain ongoing expenses during the period of restoration.
Calculating these losses is rarely simple.
Questions often arise regarding:
- Revenue projections
- Seasonal fluctuations
- Customer demand
- Restoration timelines
- Continuing operating expenses
- Extra costs incurred to minimise disruption
Even small disagreements in these calculations can result in significant differences in the amount paid.
For many businesses, business interruption losses exceed the cost of the physical repairs themselves.
What Does Texas Law Require Insurance Companies to Do?
Texas law requires insurance companies to investigate, evaluate, and pay covered claims within specific timeframes.
The Texas Prompt Payment of Claims Act, found in Chapter 542 of the Texas Insurance Code, establishes deadlines for:
- Acknowledging claims
- Investigating losses
- Accepting or rejecting coverage
- Issuing payment
When a carrier fails to comply with these requirements, additional remedies may be available.
In some situations, policyholders may recover statutory interest and attorney’s fees in addition to the unpaid portion of the claim.
Commercial claims involving wind, hail, hurricanes, and other weather-related losses may also be affected by Chapter 542A of the Texas Insurance Code.
When Does an Underpayment Become a Breach of Contract?
An insurance policy is a contract.
When a carrier pays less than the policy requires, the underpayment may constitute a breach of that contract.
Commercial disputes frequently involve disagreements regarding:
- Coverage interpretation
- Endorsement language
- Scope of repairs
- Business income calculations
- Property valuations
- Code upgrade requirements
- Policy limits and sublimits
Resolving these issues often requires a detailed review of the policy language, financial records, estimates, and claim handling decisions.
Can an Insurance Company Be Liable for Bad Faith?
Texas law requires insurers to treat policyholders fairly.
Chapter 541 of the Texas Insurance Code prohibits unfair settlement practices and requires carriers to attempt a prompt, fair, and equitable resolution when liability becomes reasonably clear.
Bad faith conduct may include:
- Misrepresenting policy provisions
- Ignoring evidence supporting coverage
- Conducting inadequate investigations
- Delaying payment without justification
- Refusing to pay benefits that are clearly owed
A simple disagreement regarding the value of a claim does not automatically establish bad faith. However, when a carrier’s conduct becomes unreasonable or dishonest, additional remedies may be available.
How Does the Appraisal Process Work in Commercial Claims?
Many commercial property policies contain appraisal provisions.
Appraisal can provide a way to resolve disputes regarding the amount of loss without pursuing full litigation.
The process generally involves:
- Each side selecting an independent appraiser.
- The appraisers attempting to agree on the amount of loss.
- If necessary, an umpire resolving remaining disagreements.
Commercial appraisals can be more complicated than residential appraisals because they often involve large repair scopes, multiple buildings, business interruption losses, and specialised valuation issues.
The quality of the evidence and the professionals involved can significantly affect the outcome.
How Does Jonathan Herrera’s Background Help Business Owners?
Commercial insurance disputes often involve sophisticated insurance companies, large financial exposures, and complex coverage issues.
Before representing policyholders, Jonathan Herrera spent more than a decade handling insurance claims and later defended insurers as an attorney. He worked on claims involving significant property damage, liability exposure, and coverage analysis.
That experience provides valuable insight into how insurers evaluate claims, calculate losses, and defend payment decisions.
Today, he uses that knowledge to help business owners challenge underpayments and pursue the benefits available under their policies.
Learn more about Herrera PLLC’s insurance law practice.
What Should You Do If Your Commercial Claim Was Underpaid?
If you believe your business insurance claim was underpaid:
- Obtain a complete copy of the policy, including all endorsements
- Review the carrier’s coverage position carefully
- Obtain detailed repair estimates
- Preserve financial records supporting business income losses
- Save all correspondence with the insurance company
- Maintain documentation of extra expenses and operational impacts
- Avoid signing releases before understanding the full scope of available coverage
Commercial claims often involve issues that are not immediately apparent during the early stages of the adjustment process.
Speak Directly With Jonathan Herrera About Your Commercial Insurance Claim
If your commercial insurance claim was underpaid, delayed, or improperly handled, Herrera PLLC is available to review the situation and discuss your options.
Jonathan Herrera personally handles client matters and works directly with business owners throughout the dispute process.
Frequently Asked Questions
Yes. Many underpayment disputes arise after coverage has already been accepted. The disagreement is often not about whether the loss is covered, but whether the amount paid accurately reflects the full value of the claim.
Business interruption coverage may compensate a business for lost income and certain continuing expenses when operations are interrupted by a covered event. The calculation of these losses can be complex and often becomes a source of dispute.
In many situations, yes. Commercial policyholders may have rights under the Texas Prompt Payment of Claims Act when carriers fail to comply with statutory deadlines or underpay covered losses.
Potentially. Whether additional recovery remains available depends on the circumstances, policy language, and whether any release was signed. Receiving a payment does not always mean the claim has been fully resolved.
Important documents often include the insurance policy, endorsements, repair estimates, financial records, business income calculations, correspondence with the insurer, invoices, contracts, and any reports prepared during the claim investigation.