Americans spend millions of dollars annually to purchase insurance policies that are supposed to protect them if they are injured, disabled, or in case they accidentally injure someone else.
Unfortunately, insurers frequently refuse to pay the legitimate claims of their policyholders. When this happens, the insured policyholder may need legal help to force the insurance company either to pay or face a claim of insurance bad faith that could cost the insurance company much more than the original claim
Topics on this page:
A. What is “Insurance Bad Faith?”
B. Types of Insurance in Insurance Bad Faith Cases
C. What You Can Recover (Insurance Bad Faith Damages)
D. Examples of Insurance Bad Faith
E. What to Do if You Think an Insurance Company is Acting in Bad Faith
F. Contact an Insurance Bad Faith Lawyer
The attorneys at the Allen Firm have defended insurance companies in the past and know how to effectively litigate cases against insurance companies.
What is Insurance Bad Faith?
Insurance bad faith occurs when an insurance company ignores its duties and fails to fulfill its end of an insurance contract by refusing to pay a valid claim, terminates a policy without due cause, delays payment or breaches the contract in some other manner.
All insurance policies are “contracts” between the insurance company and the person who pays for the policy.
In these contracts the insurance company is required to treat its insured with “good faith and fair dealing” when a claim is made against the policy. This means that the company cannot just look for reasons not to pay.
The insurance company has a duty to:
1. Conduct a full and prompt investigation of the claim
2. Give fair consideration to reasons why the claim should be paid
3. Notify you of its decision promptly
4. Give you the reasons for denial of the claim in writing
5. An insurance company may not place its own financial interests before the interests of its insured.
Types of Insurance in Bad Faith Cases
Insurance bad faith cases can involve all types of insurance including:
Homeowner’s insurance
Auto insurance
Uninsured motorist insurance
Mortgage life insurance
Health insurance
Disability insurance
Business insurance, e.g., commercial and small business insurance
Errors and omissions insurance
Flood insurance
What You Can Recover — Insurance Bad Faith Damages
A successful bad faith claim against an insurance company could force the company to pay you:
Everything that it owes under the policy, plus interest (called “contractual damages”)
Any out-of-pocket expenses that you had to pay because the claim was denied (called “consequential damages”) such as paying for a rental car or replacing a damaged roof
Payment for any mental or emotional distress that you had because of the denial (called “extra-contractual damages”)
Payment to “punish” the insurance company and to discourage it from wrongfully denying valid claims in the future (called “punitive or exemplary damages”)
Punitive damages are the most difficult to recover because you must prove that the insurance company acted in a malicious or fraudulent way, or intended to treat you unfairly (with oppression).
Examples of Insurance Bad Faith:
1. Unreasonable delay in paying a valid claim
2 .Refusal to pay disability insurance benefits
3. Denial of a valid claim without adequate investigation, or ignoring the findings of an investigation
4. Denial of employee health benefits / Health insurance denial of benefits
5. Termination of an insurance policy after a claim has been made
6. Unreasonable refusal or failure to defend a policyholder who has been sued for injuring someone else (such as 7. in an auto accident, when the policyholder is the driver who caused the accident)
8. Unreasonably offering to settle a claim for much less than its fair value
9. Placing the policyholder in danger of personally having to pay a much larger award by unreasonably refusing to pay a claim within policy limits
10. Improper or incompetent handling of claims or reserving insufficient funds to pay the claim
If you think an insurance company is acting improperly or has unreasonably denied your claim, please call The Allen Firm at 407-481-8103.