What is Insurance Bad Faith?

Insurance companies have a legal duty to act in good faith with their policy holders. Basically, that means that you pay the premiums and you should get the benefits if something is to happen, without getting the run around. Not all insurance companies are bad, but some take advantage of their policy holders and unreasonably delay, discount, or deny their policy holder’s claims for compensation. When an insurance company unreasonably delays, depreciates, or denies a policy holder’s claim, that is called “Insurance Bad Faith”, “Breach of Insurer’s Duty of Good Faith”, or simply “Unfair Trade Practices”. Insurance Bad faith could be as simple as your insurance company refusing to contact you or promptly investigate your claim. Some signs that your insurance company may be committing Bad faith:

  1. The insurance company delays, discounts, or denies payments without a reasonable basis for the delay, discount, or denial. For instance, your insurance company my depreciate labor on a homeowner’s policy claim. Or the insurance company may deny your claim without stating a reason for the denial. Or your insurance company may simply refuse to respond to your claim promptly.
  2. The insurance company fails to affirm or deny coverage of claims within a reasonable time after receiving the claim and proof of loss.
  3. The insurance company fails to do a proper, prompt, and thorough investigation as to damages and liability, and determines coverage does not apply based on the improper investigation.
  4. The insurance company harasses, or uses intrusive or demeaning investigation methods and procedures.
  5. The insurance company wrongfully threatens not to pay the claim.
  6. The insurance company attempts to settle the claim for a very small amount, smaller than what would ever be considered reasonable.
  7. The insurance company advises you not to hire a lawyer.
  8. The insurance company retaliates after the policy holder makes a claim, by unreasonably increasing premiums or canceling policies.
  9. The insurance company fails to promptly settle a claim where liability is reasonably clear.
  10. The insurance company misrepresents pertinent facts or insurance policy provisions relating to the coverage at issue.

Insurance Bad
Faith

Under South Dakota law, your insurance company owes you a duty of good faith and fair dealing. When you claim insurance bad faith, you are stating that your insurance company has violated their duty to you as their customer under your insurance policy. If they offer you a low insurance settlement or deny your valid insurance claim, your insurance company may be acting in bad faith.

Breach of Insurer’s Duty of Good Faith

An implied covenant of good faith and fair dealing in a legal contract assumes that the parties will not twist circumstances by avoiding obligations or denying what the other party obviously understood. This covenant ensures your right to seek damages and legal compensation should your insurance company act in bad faith.

Unfair Trade Practices

Sometimes, an insurance company may deny your claim or offer you an unfair settlement in order to increase profitsfor their business. This is an unfair trade practice that prioritizes their bottom line over your rights. If your insurance company is in any way behaving unreasonably, this is a direct violation of the Unfair Trade Practices Act.

These are just a few of the ways that insurance companies attempt to undercut their policy holders and deprive them of their contract benefits. When dealing with insurance companies it is important to know your rights as well as the rules the insurance companies must follow when evaluating your claim. These signs do not guarantee that the insurance companies are committing Bad Faith, but they could signal that you are being treated unfairly.

Insurance Bad Faith is not limited to any particular kind of insurance. It could show up on a property damage claim on a homeowner’s policy after a big storm, or it could show up in the claims handling process of a long-term care insurance policy. It might arise when an insurance company fails to pay an underinsured/uninsured motorist claim, or it might happen in some other context altogether.

If the insurance companies are treating you unfairly, Turbak Law Office, P.C. can help. We specialize in dealing with insurance companies; and unlike many other lawyers we NEVER represent the companies we fight. We only represent customers and policy holders.