Bad
Faith Insurance Claims
Bad faith insurance claims sometimes arise
and need to be dealt with so that the policyholder receives all
compensation they are entitled to under the contract. In most
states, insurance companies are expected to handle claims reasonably,
fairly and promptly.
Bad faith insurance claims arise when a
policyholder thinks the insurance company is not being reasonable
in handling the claim and has acted with malice, fraud or oppression
(which needs to be proven in court).
When taking a bad faith insurance claim to court,
juries will most often side with the plaintiff and assign punitive
damages if it can be proven that the insurance company has acted
in a "despicable" manner, which is difficult to prove.
Not all bad faith insurance claims in all states, however, allow
for punitive damages and a simple breach of contract case with
an insurance company may not rise to the level of a bad faith
case.
In order for an insurance company to be acting in good faith,
they need to deal with their insured policyholders fairly.
If an insurance company is acting in good faith it will:
- pay or deny the claim within a reasonably prompt period of
time
- provide all information that the policyholder reasonably asks
fo
- explain in writing each contract term that specifies why the
claim is being denied
- attempt to find valid reasons to pay the claim
- not exclusively find reasons to avoid paying the clai
- treat the policyholder's financial interests the same as their
own
- investigate the claim when notified by the policyholder of
the loss
- conduct a reasonable investigation based on current facts
and evidence
- not offer a settlement that is substantially lower than called
for in the polic
- not compel a policyholder to sue because a substantially lower
settlement was offered
- not act unreasonably in settling a claim within policy limits
that exposes policyholder to further financial claims (in case
the policyholder was at fault in an accident)
- not attempt to settle a claim that was altered without notice
to the policyholder
When thinking of going forward with a bad faith insurance claim,
it is important to realize that the insurance company is not the
only party that is expected to be acting in good faith. The policyholder
is also held to the good faith standard as well and as such needs
to submit written documentation in a timely manner, return phone
calls and follow proper procedures as outlined in the policy.
If a claim is initially denied, the policyholder in most cases
can appeal the decision with the insurance company and must follow
the outline procedures for doing this. Most courts will not hear
a case unless the plaintiff exhausts all possible appeals outlined
by the insurance policy first.
It is important to note in bad faith insurance claims that when
some of the policy terms are ambiguous, confusing or open to interpretation,
the courts generally side with the policyholder over the insurance
companies as long as the alternative way of reading the policy
is deemed reasonable. States generally have a Departments of Insurance
or some similar entity and more information may be gathered from
this organization on this issue.
For those who go forward with bad faith insurance claims it's
important to know that if bad faith is proven, the policyholder
may receive extra money for damages on top of the what is covered
in the policy. Besides recovering the entitlements outlined in
the policy, the policyholder may also be compensated for interest
on the money owed, consequential damages including attorney's
fees, compensation for mental and emotional distress and in extreme
cases, punitive damages (or exemplary damages) to discourage the
insurance company from behaving in a similar way again.
If you believe that you have a bad faith insurance claim, remember
to get everything in writing that you can from the insurance company.
Take notes regarding all phone calls including times, dates and
contact names. After exhausting the appeal process with the insurance
company, it may be time to seek the services of a personal injury
lawyer who specializes in bad faith insurance cases. Remember,
most insurance policies set two time limits that must be heeded
in order to collect on a claim. The first time limit involves
when a claim must be filed after a loss. The second time limit
involves when a lawsuit must be filed. Don't let either of these
two time limits lapse or else there will be no recourse on the
bad faith insurance claim.
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