Insurance Bad Faith Lawsuits

The relationship between an insurance company and its policyholders is one of mutual trust. The insurance company trusts the policyholder to provide accurate information when applying for insurance and to pay premiums on time. Many of these policyholders often trust that their insurance company will live up to every promise it makes in their policy, as well as compensate claims in a timely fashion. When policyholders violate that trust, insurance companies can cancel their policy. When an insurance company refuses to keep the coverage promises they have made, the solution may be more difficult. For this reason, policyholders tend to file Insurance Bad Faith Lawsuits.

Defining “Bad Faith“

The primary promise an insurance company makes to its policyholders is to pay claims promptly. Every state requires insurance companies to be reasonable in settling claims and to negotiate in good faith when there is a dispute about covering a loss. When an insurance company denies coverage without just cause, delays a claim settlement without reason, or refuses to negotiate with the policyholder, the insurance company is acting in bad faith.

How Insurance Companies Practice Bad Faith

Insurance bad faith can apply to a broad range of reasons by insurance companies that fail to keep the promises made to its policyholders. Common indicators of a company’s bad faith include:

1. Denying coverage without reasonable cause

1. Misrepresenting information about a policy, its coverage, or policy limitations

1. Failure to investigate the claim

1. Refusing to pay the claim for a covered loss (even after proof was provided)

1. Refusing to investigate a disputed claim for a covered loss

1. Delaying claim settlement or not paying within a reasonable time

1. Not acting promptly when the claim is received

1. Not offering reasons for denying the claim

1. Failure to negotiate a fair and reasonable settlement for the claim

1. Making a settlement offer that is far below the value of the claim; and/or

Not responding to a time-limit demand

Occasionally, a policyholder and insurance company may have a legitimate disagreement over a claim. They may dispute the value of the claim and loss or even if the loss is covered by the policy. Keep in mind, just because there is a difference of opinion, such does not necessarily constitute bad faith. These are things to consider for those are considering to pursue insurance bad faith lawsuits.

Investigating the Cause

Every insurance company is required to disclose its reasons for disputing or denying the claim, or for any difference in the valuation of the loss. When an insurance companys’ claims department or adjuster refuses to provide specific reasons for the claim denial or reduction in the value of the loss, such insurer may be acting in bad faith.

Options for Bad Faith Victims

When a policyholder suspects that the insurance company or its adjuster are negotiating in bad faith on a claim, they may have several options to resolve the dispute including:
When a policyholder suspects that the insurance company or its adjuster are negotiating in bad faith on a claim, they may have several options to resolve the dispute including:

Make a Verbal Allegation of Bad Faith

1. : The policyholder should clearly state that they feel the company is acting in bad faith. Reputable insurers take accusations of bad faith seriously and will usually follow up promptly with the policyholder to review the reasons for the allegation of bad faith. At that point, they may provide further information to clarify their position regarding an insurance claim.

Bad Faith Letter

1. : A written accusation of bad faith made directly to the company will often prompt them to address the policyholder’s concerns and to resolve the claim dispute quickly. The letter should state in detail why the accusation is being made and what the disputed issues of the claim are. The written allegation may motivate an insurance company to negotiate in good faith because the damages awarded to policyholders for insurance company bad faith can far exceed the original value of the claim.

Apply Legal Support

: If verbal or written accusations of bad faith do not result in a fair response from the insurance company, the policyholder can file a lawsuit to settle the claim for the original loss plus damages for the company’s bad faith practices.

Filing a Bad Faith Lawsuit

When it comes to settling claims, these monstrous insurance companies may have a higher advantage of winning in the courts, when in comparison to a policyholder who is simply defending themselves alone. Given this unfair leverage, it is always advisable to seek legal support from an attorney experienced in bad faith claims litigation.

Pursuing Legal Action for Bad Faith Actions

The interpretation of bad faith claims can vary between states, but in general, insurance bad faith lawsuits can take one of two forms:

1. A lawsuit under established common law within the state based on precedents set by the courts; or

1. A lawsuit based on a violation of a state law that prohibits insurers from engaging in deceptive practices and acting in bad faith

In some cases, common law precedents and state statutes may both apply. In each, it is necessary for the policyholder to demonstrate that the insurance company acted in bad faith.

Common Law Lawsuits

Under common law the claimant must show:

1. They had a valid claim and the claim was denied, delayed or benefits withdrawn

The reason for denial was unjustified and unreasonable

Statutory Lawsuits

A lawsuit based on a violation of a state’s bad faith statue must show that the insurer violated the specific provisions of the law. The statute will detail the protections provided to consumers and the remedies they can receive when an insurer is found to be in violation.

Seek Professional Advice

When a claim is in dispute or delayed because an insurance company is acting in bad faith, policyholders must find ways to end the delaying tactics and resolve the claim. By gaining trusted legal support with a knowledgeable insurance claims attorney, you can rest assured your claim will be diligently defended. Here, our legal staff will defend your rights, as well as negotiate a fair and proper settlement that’s well-owed to you by your insurer. For any questions you may have, or to begin pursuing your legal matter, contact our firm immediately – we’re here to help.

Your free case review regarding your unique situation is available by calling:

888-529-3111 Monday-Friday, 24 hrs a day, 7 days a week.

– Jack Ter-Saakyan, Esq.
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