What is Insurance Bad Faith?
Written by AskTheLawyers.com™ on behalf of Phillip Chupik with Metier Law Firm.
Insurance bad faith is a legal term used to refer to an insurance company’s failure to deal justly with the people they insure in order to avoid paying a claim. This could take many forms, but it generally involves an insurance adjuster operating unscrupulously in order to reduce or deny what would otherwise be a valid claim.
It can be easy to forget that insurance companies are businesses like any other, and that they make their profit by keeping as much of their policyholders’ monthly premiums as possible. Insurance bad faith is a serious allegation; if someone suspects an insurance provider is operating in bad faith, it’s important to reach out to an insurance bad faith attorney as soon as possible to discuss the situation and options for recovery.
Insurance bad faith can look like the following:
- Deliberately misinterpreting policy language in order to reduce or deny a claim.
- Deliberately misinterpreting policyholder records in order to reduce or deny a claim.
- Offering an unreasonably low settlement.
- Poor communication and failure to respond to or answer questions.
- Creating unreasonable and/or unnecessary delays to avoid resolving a claim.
- Arbitrary demands for proof that are irrelevant to the claim.
- Failing to conduct an adequate and timely investigation following the claim.
- Telling the policyholder that they will be required to contribute to the settlement outside of their existing contractual obligations.
Even keeping the above in mind, it can be hard for a policyholder to identify insurance bad faith.
Unfortunately, insurance policies and policy language can be notoriously complicated, and they often require the help of an insurance bad faith expert to interpret. It’s not uncommon for insurance bad faith to go unrecognized simply because an adjuster knows how to take advantage of the policyholder’s confusion. This is why it’s important to always seek counsel before accepting any settlement from an insurance company if you suspect they are dealing unfairly. An insurance bad faith attorney will be able to quickly and clearly identify conduct violations and push for the full settlement your claim deserves.
If insurance bad faith is at play, you may be eligible to file an additional claim against the insurance provider.
Insurance bad faith can be deeply harmful, both financially and emotionally, on top of the stress that accompanies filing a claim in the first place. It’s important to hold unfaithful insurers accountable for their actions, as well as to seek the full amount of recovery you are eligible for under the policy you paid for. However, it may also be possible to seek additional damages from the insurance provider, including compensatory and punitive damages. Compensatory damages are separate from the amount of money the insurance provider contractually owes and is intended to compensate the policyholder for the injustice they suffered. Punitive damages are not particularly common but may be applied as a deterrent to prevent the company from conducting itself similarly in the future.
If you suspect you are experiencing insurance bad faith after filing a claim, reach out to an insurance bad faith attorney in your area before making any agreements with an insurance provider.