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As a policyholder, each month you pay your insurance bill to put your mind at ease should an accident occur. If someone gets hurt in an accident, you have a reasonable expectation to receive compensation for the coverage you pay for.
Although most insurance companies honor policyholder agreements, some insurance adjusters may act with bad faith. If an insurer refuses to pay your claim without a good reason, they may be acting in bad faith. Part of paying for insurance means there is an implied notion of good faith and fair dealings between the insurance company and the policyholder.
If you think your claim was unfairly denied, you may have cause to file a lawsuit. These cases are complicated, however, and it’s best to consult with a lawyer to determine an effective course of action.
What Are Bad Faith Insurance Claims?
A bad faith claim is different from a denied claim. If your insurance claim is denied for an adequate reason that’s outlined in your policy, then no bad faith exists. A bad faith claim is when an insurance company unreasonably denies your claim or withholds benefits for no good reason.
Insurance Companies Have Duties To Policyholders
Insurance companies must fulfill certain duties to policyholders. A policyholder is the person who pays for the insurance or is covered under the policy. If an insurance company fails to meet these policyholder duties, then it may be in bad faith.
A Duty To Investigate
An essential duty insurance companies have towards you is to investigate a claim. If an insurer fails to conduct a thorough investigation, as well as provide a monetary valuation for the claim, then they may have acted in bad faith. Insurance companies who delay an investigation without a good reason may also fail to meet this duty.
A Duty To Uphold The Policy
An insurance company has a duty to compensate policyholders under the agreement of the policy or up to the limits of coverage. They also have a duty to honor any responsibilities or obligations outlined in the policy, including ones that go beyond the law. If there is a dispute in your agreement due to ambiguous language, for example, then some courts may rule in your favor.
A Duty To Defend You
Some insurance agreements outline that the insurer has a duty to defend you under particular circumstances. If you’re sued by a third party, then your insurance company may be obligated to provide legal representation to defend you. This duty also requires insurers to pay for legal judgements against you and as dictated by the details of your policy.
A Duty Of Good Faith
This duty means the insurance company must also act in the policyholder’s best interest. This duty is implied in all insurance agreements, and is the central duty for preventing bad faith. If your insurance company fails to meet this duty, then you may be able to sue for damages.
Understanding Common Law Bad Faith
Bad faith insurance laws vary from state to state. Local and state laws will likely shape how bad faith insurance fits into legal matters. In some cases, a bad faith claim may be based on a violation of state law, while others will follow common law established by courts.
It gets complicated because bad faith claims could be pursued as a breach of contract in some states, while other states view bad faith as tort or civil law. To prove a bad faith claim under common law, consider the elements a policyholder must show.
Policy Benefits Were Withheld
After filing a bad faith claim under common law, you must prove that the claim was valid and you were entitled to benefits as dictated by the policy. You must also show that the claim was denied. Depending on state law, you may also have to show that you made a demand with an insurance company before moving forward with a lawsuit.
No Good Reason For Withholding Benefits
Proving the insurance company acted unreasonably when denying your claim is trickier to prove. Courts will try to look objectively at the facts of the claim denial and how they played a role in the decision.
It may be the case that there is only liability when a claim is intentionally denied for no good reason. Negligence, or a failure to act with reasonable care, may not be enough to prove this element in some states.
How To Spot Bad Faith Tactics
Dealing with insurance companies can be difficult. Even when insurance companies are in good faith and reasonably examine your claim, it can be hard to follow negotiations or understand how the insurance adjuster operates.
In many injury insurance claim cases, there may be a fine line between bad faith and good faith. Insurance companies have a duty to provide coverage for a valid claim without a good reason.
But state laws vary and individual insurance companies may implement their own regulations for deterring bad faith operations. Although there are standards put in place to avoid bad faith, consider some examples of potentially bad faith tactics after you file a claim.
Examples Of Bad Faith Tactics
The following examples are not definitive evidence that an insurance company acted in bad faith, but are listed to help you better identify some common bad faith tactics.
An insurance adjuster may act in bad faith when they:
- deny coverage without investigating your claim
- take too long determining the coverage you had at the time of injury
- ignore your telephone calls, emails, or letters
- use inaccurate legal or medical terms to diminish your claim
- intentionally drag out settlement negotiations so statute of limitation laws apply
- refuse negotiations after you file a valid claim
- fail to deny or payout your claim in a reasonable timeframe
- fail to give you a clear written explanation for why your claim was denied
- falsely cite local laws to defend your claim denial
- replace themselves with another adjuster during negotiations to delay your settlement
Even if an adjuster acts in one of these ways, it’s important to remember that bad faith may not have existed. It’s helpful to consult with a lawyer if you feel like your insurance claim was unfairly denied, or if you believe your insurance adjuster acted in bad faith.
What To Do About Bad Faith Insurance Claims
Your best course of action will depend on where you are in the insurance claims process and the level of bad faith you suspect. You may want to consult with a legal expert to determine how you can resolve your claim or settlement dispute, including whether you should work with an insurance lawyer or a personal injury lawyer.
Bad Faith Insurance Lawsuits
How to file a bad faith insurance lawsuit depends on several factors. If the claim involves your homeowner or auto insurance policy, then you will file the lawsuit as a “first-party claim.”
If you suffered an injury from an accident caused by somebody else, then you would likely file a claim with their insurance. For this claim, you’re considered a “third party.”
First-Party Bad Faith Claims
In many states, first-party claims are based on a legal cause of action. This means that state law may only allow you to file a bad faith lawsuit against the insurance company you have a policy with.
If you’re being sued by a victim of a car accident because your insurance company acted in bad faith towards the victim, then you could also file a first-party bad faith claim. This is because your insurance company has a duty to defend you from being sued and may act in bad faith if they fail to meet this duty.
Third-Party Bad Faith Claims
Whether you can file a third-party claim against another individual’s insurance depends on the state you live in. Many states do allow third-party bad faith claims, and the ones that don’t may offer solutions for when insurance companies fail to meet their duties. Due to the complexities of these claims, it’s important to consult with a qualified lawyer.
Mention Bad Faith To The Insurance Company
If you’re dealing directly with the insurance company when you file a claim, then it might be a good idea to contact the insurance company to discuss potential bad faith. If you stick to facts and compose a carefully constructed letter, they may respond in good faith.
You can list the reasons why you think the adjuster is acting in bad faith, being as specific as possible. However, if you think the behavior is blatantly unfair, then you may want to contact a lawyer before reaching out to the insurance company directly.
Contact Your State’s Insurance Board
Another option for dealing with bad faith insurance claims is contacting your state’s insurance board. You can file a complaint with the insurance department of your state. Once your complaint is filed, the state will likely conduct an investigation.
Depending on whether your insurance claim is a first- or third-party claim, there may be additional procedures in accordance with state law. Gather as much information as you can and consult with a lawyer if you’re unsure what to do.
Contact A Personal Injury Lawyer
Bad faith lawsuits are something insurance companies work hard to avoid. These lawsuits are costly and time-consuming and can involve major payouts, as well as damage the reputation of the insurance company. The majority of insurance companies act in good faith and will reprimand an insurance adjuster who acts in bad faith.
However, simply contacting a personal injury lawyer can help you better understand your legal options. One mention of a lawyer to your insurance company, or having a lawyer write a letter to the company, can put a quick end to bad faith tactics and help ensure you receive a fair settlement.
Bad Faith Insurance Lawyers Serving The U.S.
Insurance matters are complex. If you or someone covered in your policy was injured in an accident, then you expect the insurance company to act in good faith and compensate you for a legitimate claim. If they act in bad faith, you may need to hire a lawyer.
Florin|Roebig operates legal offices in four states in the U.S., with a team of lawyers helping clients file claims for a number of areas of practice, including bad faith insurance claims.
Contact Us Today To File A Bad Faith Insurance Claim
Insurance issues can be confusing and frustrating, let alone bad faith issues that require legal action. If you’re unsure about how to move forward, or if you feel like your insurance adjuster acted in bad faith, then you can submit a free case evaluation to our office.
To get started with your free case evaluation, or to learn more about bad faith insurance claims, please contact Florin|Roebig today.