When a business uses unfair or deceptive means to sell you something, or to profit unfairly from your business it is not just an inconvenience: it may actually be a violation of law. Such misleading business practices, often referred to as unfair trade practices, can be especially harmful when they are performed by insurance companies acting in bad faith. If you have been a victim of unfair trade practices, though, you should know that there are laws in place to protect your rights.
Laws against unfair trade practices
Fraudulent and unethical practices by businesses are prohibited by both state and federal law. The Federal Trade Commission Act concerns “acts or practices in or affecting commerce” and distinguishes between practices that are unfair and practices that are deceptive. An act or practice is considered to be unfair if it (1) causes or is likely to cause substantial damage to consumers, (2) cannot be reasonably avoided by consumers, and (3) is not outweighed by countervailing benefits to consumers or to competition. Meanwhile, a deceptive practice occurs when (1) a representation, omission, or practice misleads or is likely to mislead the consumer, (2) a consumer’s interpretation of the representation, omission, or practice is considered reasonable under the circumstances, and (3) the misleading representation, omission, or practice is material. South Dakota also has state laws prohibiting deceptive acts or practices in business. Under South Dakota law, a person may not “knowingly act, use, or employ any deceptive act or practice” or “conceal, suppress, or omit any material fact” with regard to the sale or advertisement of merchandise.
Unfair trade practices in insurance
The National Association of Insurance Commissioners, also known as NAIC, specifically addresses unfair trade practices in insurance within the guidelines of the Unfair Trade Practices Act. An act by an insurance company is considered an unfair trade practice if it misrepresents or falsely advertises an insurance policy. Some examples of unfair trade practices include:
- Misrepresenting the benefits, advantages, conditions or terms of any policy
- Misrepresenting the dividends or share of the surplus to be received on any policy
- Misleading or misrepresenting with regard to the financial condition of the insurer
- Using any name or title of a policy or class of policies that misrepresents their true nature
To be considered an unfair trade practice, the act must also be “committed flagrantly and in conscious disregard” of the Unfair Trade Practices Act or any rules promulgated under it and be “committed with such frequency to indicate a general business practice to engage in that type of conduct.”
If you have been the victim of an insurance company’s unfair trade practices, you may be eligible to sue for damages if there is evidence that the insurance company acted in bad faith.
Insurance bad faith
As the insured, you are expected to disclose all pertinent information, make prompt payments on your insurance premiums, and meet other requirements of your insurance policy. Your insurer is also expected to meet their end of the deal by promptly attending to a legitimate claim and paying any amount due under your policy. When an insurer does not fulfill its contractual obligations to you as a policyholder, though, that insurer may be acting in bad faith.
If you believe that your insurance company sold you a policy by misrepresenting its terms, it is possible that you have been a victim of insurance bad faith. Insurance bad faith may take many other forms as well. Denying a claim without conducting a sufficient investigation, failing to act on available information within a reasonable time frame after a claim is filed, refusing to make a prompt and fair settlement when the validity of the claim has been established, and misrepresenting the contents of your policy to avoid paying a claim are all possible signs of bad faith.
Not all insurance companies act in bad faith, and a denied claim or a mistake by your insurer is not always a sign of bad faith. However, insurance is a for-profit business, and some insurers may be tempted to deny claims or misrepresent the terms of a policy so they can reduce the number of claims that they have to pay.
Do not feel like you have to take an insurance company on alone, especially if you have been recently injured in an accident and your insurer is showing reluctance, or even refusing, to provide you with appropriate compensation. A South Dakota insurance bad faith attorney will help you establish if there is a basis for a bad faith claim and make sure you receive the insurance benefits that you paid for.
For more information
If you are worried that you have been a victim of an insurance company’s unfair trade practices, a South Dakota insurance bad faith attorney can help you prepare a case. Contact Turbak Law Office at (866) 231-0914 for a free consultation.