What is a Bad Faith Insurance Claim?

There is no doubt that insurance companies hold all the power when it comes to settling claims. They have the financial resources and expertise that the policyholder is likely lacking. There is a reason why insurance companies are so closely regulated just due to the sheer advantage they have over their insureds who depend on them. These companies are obligated to handle each claim in a fair manner, however; that is not always the case as many partake in bad faith practices.

What is Bad Faith Insurance?

You may have heard the phrase “bad faith insurance,” and are unsure of what exactly it entails. The term refers to the tactics insurance companies use in order to avoid their contractual obligations or policy rules while violating the “implied covenant of good faith and fair dealing.” To put simply, insurance companies are acting unfairly in the handling of the claim.

Bad faith insurance can apply to any type of insurance policy. It can include health insurance, homeowners’ insurance, auto insurance, and life insurance. Some companies may deceive their insurers by committing bad faith through a variety of means including, deliberately delaying resolution of claims, failing to conduct investigations of the claims, misinterpreting the language of their policies, or refusing to pay the claim without good reason. These actions are all too common from insurance companies looking to guard their profits. The best possible scenario for them would be to pay as little as possible for your claim because when they pay you the amount you deserve, they lose, as it comes out from their own pockets. Insurance company adjusters are skilled negotiators who know how to exploit every aspect in a case to leave you with the bare minimum. Although it may seem impossible to establish the true motive of these insurance companies, bad faith can be proven by demonstrating that the company’s actions are truly unreasonable and unjustified.

Examples of Insurance Company Bad Faith

Some bad faith tactics that insurers may use:

  • Unreasonable delays without proper explanation
  • Refusal to pay valid claim
  • Trying to settle claim for less than your claim is worth
  • Lack of or infrequent communication
  • Failure to conduct a prompt investigation
  • Denying claim without cause
  • Misrepresentation of policy rules or language
  • Refusal of requests for documentation
  • Use of threatening tactics or pressure to discourage claims

What Kind of Damages Could You Receive from A Successful Bad Faith Claim?

When your claim has been wrongfully denied, your insurer has breached its contractual obligation to you. Furthermore, if an insurance company is also found to be intentionally acting in bad faith, they are subjecting itself to possible punitive damages. Punitive damages, or exemplary damages, are awarded to punish the specific party for their wrongdoings and to act as a deterrent from repeating their actions with other policyholders. Contract damages, which is the amount the insurer rightfully owed under their policy, should also be awarded. Lastly, to compensate you for any emotional distress, economic loss, and attorney fees, you would be awarded extracontractual damages. In a Texas insurance bad faith lawsuit, you may be able to recover 3 times the actual damages.

Experiencing Bad Faith? Contact Us Today

If you believe your insurance company has acted in bad faith through any of the various tactics mentioned above, it is important that you document all conversations you have with the company and preferably communicate with them via letter as opposed to phone. We know how frustrating these situations can be for individuals and you should not be trying to deal with the claim on your own. In many instances, the insurance companies will not take you seriously if you are without a lawyer on your side. Consult with one of our experienced attorneys as soon as possible and let us help fight to protect your rights. You may have valid grounds to file a bad faith insurance lawsuit. You are entitled to a fair and speedy settlement of your damages. Call us at (888) 902-6245 for a free consultation.

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