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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.

 

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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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