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Insurance Bad Faith Goes Beyond Rejected Claims

Insurance Bad Faith Goes Beyond Rejected Claims

If your insurance carrier mistreated you, you may have the option of suing the company for damages due to their bad faith. As a business litigation lawyer will explain, these lawsuits are for extreme cases, not just a situation where there’s a reasonable disagreement on whether a claim should be covered and how much.

What Is A Bad Faith Insurance Claim?

It’s a legal cause of action that may be an option if your insurer doesn’t treat you fairly and appropriately in compliance with the policy’s language and state law when processing your claim. In this situation, a successful lawsuit or settlement enables you to obtain compensation for the financial harm it caused. Depending on state law, you may be able to recover multiple times your financial losses.

You may receive punitive damages if the insurer acts outrageously and egregiously when denying your claim. They’re to punish the insurer and discourage it and other insurance companies from treating policyholders the same way in the future.

There are first-party bad faith claims when they involve the insured and their carrier. There are third-party claims if someone injured or financially harmed makes a claim against the responsible party’s insurance policy and they’re mistreated.

How Do I Prove My Case?

It’s your burden to show that it’s more likely than not the insurer acted improperly and illegally in handling your claim. This will take more than establishing they committed mistakes as our friends at Focus Law LA will share. Generally, your insurer must act unreasonably or egregiously when it wrongfully denied the coverage you were entitled to. Depending on the state law, you may need to prove the insurer intentionally and purposefully prevented you from providing the coverage you paid for.

The Duty Of Good Faith

Under contract law, there is an “implied covenant of good faith and fair dealing.” The parties must act in good faith and treat each other fairly to fulfill the agreement’s terms.

Your insurance policy is a contract. You both have duties and obligations. The insurer’s duties include the following:

  • To investigate a claim promptly and properly
  • To defend you if you have liability insurance that should cover a claim made against you
  • To indemnify or pay court-ordered damages or settlement costs of a covered claim made against you
  • To settle a claim if an opposing party proposes a reasonable settlement and it protects you from costs that could arise from a lawsuit

If your insurer unfairly fails to fulfill their obligations, they may have violated their duty of good faith and fair dealing. If so, they’re acting in bad faith, which can be the basis of a lawsuit.

What Are Examples Of Bad Faith?

There are many things an insurer could do or fail to do that could be considered bad faith. Some of them include the following:

  • Denying a claim without an investigation or inventing a justification
  • Making an unreasonably low settlement offer for a claim that’s covered
  • Refusing to consider evidence showing a claim should be approved while searching for reasons to deny your claim
  • Unreasonably delaying a claim decision
  • Not disclosing insurance you’ve paid for that may cover the claim
  • Making threats against you

What’s bad faith by an insurance carrier depends on the facts of the situation, policy language, and applicable state law.

What Can I Recover In A Bad Faith Claim?

Part of your case is establishing that your insurer’s actions financially harmed you. This must be well-documented and may require expert testimony. You may convince a jury you were the victim of bad faith behavior by your insurer, but they may decide your award should be less than you request. What are recoverable damages can vary from state to state.

Recoverable damages may include the following:

  • Financial losses you suffered because of your insurer’s bad faith actions
  • Legal fees and court costs you incurred
  • Punitive damages if the insurer acted outrageously
  • Penalties imposed by applicable state statutes
  • Interest on the money you should’ve received since the time it was wrongly withheld
  • Damages for your emotional distress

You paid for insurance coverage. Contact your attorney to discuss your options if your insurer mistreats you illegally and denies it.