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Restoring the past, building the future
When disaster strikes – whether it’s water damage or black mold in your home – and you file an insurance claim, you expect fairness, clarity, and prompt service. That’s why it can be surprising and frustrating to find that the system may not always be built with your best interests in mind. One major player in this system is the Third-Party Administrator (TPA). But who are they really working for?
Let’s break it down, here’s what we’re gonna cover:
A Third-Party Administrator (TAP) is a company hired to manage insurance claims on behalf of an insurer or employer. TPAs handle everything from processing paperwork to making decisions about what gets approved-and what doesn’t.
In the context of property insurance claims, TPAs are expected to follow the broader legal principle known as the duty of good faith and fair dealing. This legal standard requires that insurance companies, including the vendors and administrators working on their behalf, handle claims fairly, promptly, and without placing their own financial interests ahead of the policyholder’s rights.
So, in theory, TPAs should administer claims impartially, making decisions based on the facts of the loss and the terms of the policy, not solely based on cost-saving for the insurer. However, in practice, the financial relationship between TPAs and insurance companies can sometimes lead to outcomes that are less balanced to homeowners.
While the legal requirement sounds good on paper, the practical reality is much more complicated.
Here’s the issue: TPAs are paid and contracted by the insurance company-not the policyholder. And like any service provider, they’re motivated to keep their client (the insurer) happy. This creates a subtle but powerful incentive to minimize payouts, deny claims, or reduce coverage in ways that benefit the insurer’s bottom line.
In other words, even though TPAs are supposed to act fairly toward you, their paycheck and ongoing contract depend on keeping costs low for the company that hired them. And that company isn’t you.
There have been multiple cases and industry reports suggesting that some TPAs make decisions that lean heavily in favor of the insurance carrier or employer. These can include:
Here are two real life cases where the TPA was found by the court to act in bad faith:
Forest v. Equitable Life Assurance Society of U.S.
In this case, two TPAs (Paul Revere and Provident Life) and one insurer (Equitable) were found to have operated as joint venturers in handling disability insurance claims. The TPAs exercised broad discretion in claims management while sharing resources like information, staff, bank accounts, and marketing with the insurer.
The court ruled that because the TPAs were so intertwined with the insurer, sharing profits and having a common business interest, they could be held liable for bad faith conduct, not just the insurer.
Sharkh v. Continentale Krankenversicherung A.G.
In this case, the court rejected a TPA’s argument that it couldn’t be sued for breach of contract and bad faith simply because it wasn’t technically a party to the insurance policy. The plaintiffs (the insureds) showed that the TPA (Global Medical Management, Inc.) and the insurer (Continentale) operated as a joint venture, sharing profits, losses, and discretionary authority over claims.
The court found that the TPA could indeed be held liable for wrongful claim denials, especially where serious health issues were involved.
To be clear – not every TPA operates this way (and neither do most TPAs), still – the structural conflict of interest is very real and it’s something every policyholder should be aware of.
If you’re a homeowner or property owner dealing with an insurance claim handles by a TPA:
If the initial offer from a TPA or insurance adjuster does not fairly reflect the extent of your damages, you are under no obligation to accept it. The first settlement offer is not binding, and you have every right to push for a resolution that accurately covers your losses.
One effective step you can take is to submit your own contractor’s estimate. By providing a professional, independent estimate for the necessary repairs, you gain leverage to negotiate a higher settlement. While the TPA or insurer may need to review and approve these estimates, presenting credible documentation strengthens your position.
If negotiations stall and you and the insurer continue to disagree on the value of the claim, you may invoke the appraisal process. Most property insurance policies include an appraisal clause, allowing each side to hire an independent appraiser. If the two appraisers cannot agree, a neutral umpire can be appointed to make a binding decision on the value of the loss.
Another available route is mediation. Mediation is a non-binding process where a neutral third party works with both sides to facilitate an agreement. It can be a useful tool to break deadlocks and reach a mutually acceptable settlement without having to escalate to litigation.
For additional support, you can consult a public adjuster or an attorney. A public adjuster works exclusively for policyholders, providing an independent evaluation of the damage and negotiating directly with the insurer on your behalf. If needed, an attorney can guide you through legal options and help enforce your rights under your insurance policy.
Finally, if you believe the settlement offer remains unfair, you have the right to file a written appeal with your insurer. Submitting an appeal with thorough documentation and a clear explanation of your position can prompt the insurer to reconsider and reevaluate the claim.
Whether it’s a public adjuster (PA) or an independent contractor, having someone in your corner can make a huge difference. With our in-house PA at M&M we are able to help you with that and help you make sure your claim is handles by someone with your interest in mind.
Keeping a detailed paper trail is one of the most important steps you can take when handling a property insurance claim. Save all correspondence with the insurance company, TPA, contractors, and any other parties involved, including emails, letters, text messages, and call notes. Maintain copies of estimates, invoices, repair receipts, and inspection reports. Take date-stamped photos and videos of the damage before, during, and after the restoration process.
Proper documentation strengthens your position if you need to escalate the claim, request an appraisal, file an appeal, or even pursue legal action. The more organized and thorough your records are, the harder it becomes for the insurer or TPA to dispute your claim.
TPAs are supposed to serve both the insurance company and the policyholder, but the reality is that the scales can be tilted. Their contractual relationship and payment structure often make them more accountable to the insurer than to you.
At M&M Restoration, we’ve seen how this dynamic plays out firsthand and we’re here to help policyholders get the fair treatment they deserve. If you’re dealing with water damage, mold, fire, or any other loss, we’ll help you navigate the insurance maze and fight for your interests – not the insurance company’s.
