Individuals often purchase insurance products with the hope that if something were to go wrong, their insurance company would come through for them. But a lot of people often complain that the reverse is the case. If you find yourself in such a situation, you can file a claim for bad faith. Bad faith in insurance typically refers to a situation where an insurance provider acts unfairly or dishonestly by violating its contractual duties to policyholders.
This can take many different forms, like unfairly rejecting a claim, withholding payment without good reason, or failing to fully investigate a claim. Insurance contracts are typically based on the principle of good faith and fair dealing. Violating this duty by insurers may result in legal consequences, as policyholders have the right to sue them.
This article contains comprehensive information about what bad faith in insurance typically means, examples of behavior that fall under this category, as well as tips on how to protect yourself against bad faith in insurance.
What Is Bad Faith in Insurance?
As mentioned before, bad faith in insurance is simply a situation where an insurer behaves unfairly and inappropriately when processing the claim of a policyholder. If you discover that your insurance company is not providing adequate coverage for your claim. You can report the matter to the appropriate authorities and get compensation for your claim and other damages along the line.
Examples of Bad Faith in Insurance
Insurance companies can engage in bad faith in several ways. Most policyholders raise alarm for bad faith insurance claims due to certain misconduct on the part of the insurance company. Highlighted below are typical examples of bad faith in insurance:
- Denial of claim that should be covered by the policy.
- Delaying claim processing.
- Providing very low settlements for a covered claim.
- Refusal to investigate a claim thoroughly.
- Investigating a claim for no reason.
- Ignoring communication from policyholders.
- Failure to provide a valid explanation for denial of coverage.
- Not defending a policyholder in legal matters when required.
- Unjustly canceling or not renewing policies.
If, after filing a claim with your insurance company, you suspect or have evidence of bad faith, we suggest that you get in touch with your state’s insurance authority or reach out to a licensed attorney for proper guidance on what to do.
Tips on How to Protect Yourself Against Bad Faith in Insurance
When you file a claim for a covered incident it is denied. If you perceive and suspect that the insurance company is deliberately acting unfairly by not processing your claim, here are the steps you should take:
Document Your Claims
Put down in writing the entire information as regards your claim and show it to your claims handler. To be on the safer side, it is advisable to gather all necessary documents about the claim. These include statements of accounts, receipts, or past correspondence with your adjuster. Make sure that the documents are relevant and can show that your claim is authentic and needs to be processed.
Reach Out to Your State Department of Insurance
You can also protect yourself against bad faith by contacting the Department of Insurance of your state. Make a detailed report of your complaint and present it to the right authorities. Your state department of insurance will take it upon themselves to conduct a thorough investigation of your claim. If your insurance company was found negligent, they may be fined or penalized.
Consider Consulting an Attorney
Another way in which you can fight against bad faith in your insurance policy is by seeking professional advice from an experienced and licensed lawyer. Most attorneys are familiar with the insurance laws and regulations in your state. And because of that, they can offer valuable insight and guidance on legal steps you can take to ensure that your claim is attended to.
Damages in a Bad Faith Case
When you file a bad faith insurance claim against your insurance company, you are automatically entitled to receive compensation for your claim and other related expenses. However, note that the level of compensation you are to receive will be contingent on several factors. Such as your state law, rule within your jurisdiction, and the type of misconduct your insurer was engaged in.
Notwithstanding, if it was confirmed by your attorney that your insurance provider acted in bad faith, you will be reimbursed for financial losses incurred during the process, and this includes court costs, your attorney fee, and damages for emotional trouble you went through.
In addition, the insurance company will also face legal penalties and will be required to pay fines and compensate you duly for the misconduct. If you need proper guidance on how to file a claim for bad faith in insurance, reaching out to a competent and knowledgeable lawyer is the best option.
FAQs
How can policyholders identify bad faith in insurance?
If you notice that your insurer unreasonably delays the processing of your claim or cancels your claims for no good reason, you should be concerned. Another sign of bad faith in insurance is a lack of communication about the status of a claim. Check out other examples we also mentioned in this article.
Can a policyholder sue for bad faith?
Why not? If you have evidence that demonstrates the misconduct of your insurance provider, then you can sue them for bad faith and violation of your rights.
What legal consequences can insurers face for bad faith?
Insurers could face lawsuits, fines, and compensation for damages done to the policyholders, which includes reimbursement for emotional distress and legal costs.