You expect your insurance carrier to deliver on its promise to be there for you when you are most in need, in the unlikely occurrence of an accident or other event.

Your insurance policy is supposed to deliver peace of mind. You trust the insurance company to deal with you fairly and honestly. In the United States, an insurance company has a duty to treat its insured’s interests equally to its own. This duty is referred to as the “implied covenant of good faith and fair dealing.” It’s an implicit obligation that assumes all parties to a contract will act honestly and in good faith in performing under the agreement.

Unfortunately, this promise is not always fulfilled. When an insurance company (1) fails to pay a claim for reasons that are frivolous or unfounded, (2) refuses to defend its insured against liability claims that fall within policy coverage, or (3) refuses to timely investigate, fairly evaluate, and settle a claim against its insured, its unlawful conduct is referred to as Insurance Bad Faith.

In response, the policyholder can sue the company for damages beyond those recoverable for standard breach of contract, including for all emotional and financial losses suffered by the insured as a result of the insurance company’s wrongful conduct. The insured files a tort claim (in most states) against the insurance company alleging intentional conduct causing injury or harm.  When an insurer acts in bad faith, its insured may be able to recover an amount much larger than the limits of coverage set in the policy, including punitive damages intended to punish the insurance carrier and deter it and other companies from acting in a similar manner in the future.

Large insurance companies can intimidate the “little guy”, tapping into vast resources to pressure the insured to simply take what is offered to them. That is why compensation for punitive damages needs to be high – especially in blatant bad faith cases. A large insurance company with billions of dollars in assets and deep pockets needs to think twice before it takes back its promise to the customer.

By and large, insurers are ethical and they typically operate in good faith. However, it is always in their interest to pay you as little as possible while operating within the limits of your policy. There are also insurance companies out there that cross the line and are unscrupulous, who never intend to pay what you are due.

Insurance bad faith lawsuits are complicated affairs. The legal team must prove a refusal to pay, defend, or settle, coupled with a conscious intent to “injure” the claimant. Here are some clear examples of bad faith scenarios:

• The insurer lowballed your claim after not thoroughly investigating it;
• The insurer intentionally misinterpreted or inaccurately represented their own policy to minimize the cost to it;
• The insurer took an unreasonable length of time to pay your claim; or
• You were denied without a full or reasonable explanation.

In addition, the following are claim settlement tactics that should raise a red flag:

Assigning Liability

The insurance company will arbitrarily assign a percentage of liability or fault to those involved in the event or accident, without thorough investigation or real consideration of who was truly responsible. This practice is maddening if you, or a third party, were not reasonably at fault!

Settle With The Other Company

The adjuster may try to hand you off to the insurance company representing other parties involved in the accident or event claiming those clients were more at fault. Until one company or the other commits in writing to be the primary insurance carrier, all carriers representing everyone involved are in play.

Waited Too Long

If you delayed for a while notifying the insurance company of your intended claim, the adjuster may inform you that you waited too long, disqualifying your claim. Not true! There is no time limit on filing a claim. The “statute of limitations” only applies if you decide to take the matter to court and file a personal injury lawsuit. A policy may require that a notice be filed within a certain number of days, but the insurance company must honor your claim unless you waited SO long that it would no longer be possible to perform an investigation.

You Got Paid Already

It is not okay for insurance adjusters to factor in what was paid by your health insurer, subtracting these amounts from the total amount due to you. It is none of their business. Under the collateral source rule, the adjuster does not have the right to consider other sources of payment in determining your damages or the settlement amount.

Not every claim denial rises to the level of bad faith. There are legitimate situations where your policy may simply not cover the damages surrounding the accident. When in doubt, thoroughly review your insurance policy. Insurance policies are long, complicated documents with many exclusions, i.e., types of damages that aren’t covered. 

Insurance bad faith tort cases are complex. It is advisable to reach out to an experienced legal team like the one at PSKB to help you navigate through this intricate process.  Please call us at 505-982-5350.