What is Insurance Bad Faith?
Insurance companies have a legal duty to act in good faith with their policyholders. This means that you pay the premiums, and you should get the benefits if something is to happen without getting the runaround. Of course, not all insurance companies are bad. But some take advantage of their policyholders and unreasonably delay, discount, or deny their policyholders’ 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:
- 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.
- The insurance company fails to affirm or deny coverage of claims within a reasonable time after receiving the claim and proof of loss.
- 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.
- The insurance company harasses or uses intrusive or demeaning investigation methods and procedures.
- The insurance company wrongfully threatens not to pay the claim.
- The insurance company attempts to settle the claim for a very small amount, smaller than what would ever be considered reasonable.
- The insurance company advises you not to hire a lawyer.
- The insurance company retaliates after the policy holder makes a claim by unreasonably increasing premiums or canceling policies.
- The insurance company fails to promptly settle a claim where liability is reasonably clear.
- The insurance company misrepresents pertinent facts or insurance policy provisions relating to the coverage at issue.
Breach of Insurer’s Duty of Good Faith
An implied covenant of good faith and fair dealing in a legal contract assumes 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 profits for 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 policyholders 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 don’t guarantee that the insurance companies are committing bad faith. They could, however, signal that you are being treated unfairly.
Insurance bad faith isn’t 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 focus on dealing with insurance companies. And unlike many other lawyers, we never represent the companies we fight. We only represent customers and policy holders.