How To File a Bad Faith Insurance Claim

Insurance allows people to live with fewer worries as it lessens risk and offers financial protection from disasters, accidents, and other unexpected events. In a perfect world, insurance works how you need it to and pays you if something bad happens. Sadly, this is not the reality for many policyholders.

Some insurance companies use bad faith insurance claims practices to deny policyholders their rightful compensation when needed, often after a car accident, medical issue, or property disaster. Bad faith insurance companies are more concerned with profit, putting policyholders in a compromising financial position.

A bad faith insurance claim might appear as a valid claim rejection. But, it is an unethical insurer’s way of reneging on its legal obligations to benefit the bottom line. Luckily, a bad faith insurance lawyer can help you recover compensation and put an end to these deceitful practices by suing an insurance company for bad faith.

What is a Bad Faith Insurance Claim?

An insurance contract is a legally binding agreement between an insurer and a policyholder. It usually includes coverage information, conditions, policy limitations, exclusions, and other details. Common insurance policies include car, homeowners, health, life, and travel insurance.

Essentially, a policyholder agrees to specified payments in exchange for protection and a payout from the insurer if the covered event in the contract occurs, like a car accident, illness, or fire. This is how the transaction is supposed to work unless the insurer is engaging in bad faith claims practices. Bad faith insurance is intentionally refusing to pay legitimate insurance claims or failing to investigate and process a policyholder’s claim within a certain period.

Insurance companies often use unethical insurance practices to cheat policyholders out of a payout.

Some examples of bad faith insurance practices might include:

• Misrepresenting an insurance contract’s language to deny or reject a payout.
• Failing to disclose policy limitations and exclusions before a policyholder purchases the policy.
• Making unreasonable demands, like excessive paperwork requests to prove a covered loss.
• Delaying communication regarding a claim or avoiding it altogether.
• Refusing to investigate a claim and offering a resolution.

Sometimes claims get rejected for the wrong reasons, and signs like unexplained delays, vague responses, or sparse communication might indicate bad faith practices.

First-Party Bad Faith

Insurance companies have legal and ethical obligations to treat policyholders fairly. A first-party insurance claim refers to a lawsuit filed against your insurance company — the “first party” — for unethical claims practices. These could include insufficient processing of your claim, inadequate investigation, delayed payment, or unreasonable claim denial. If your insurance company has violated the terms of your policy, you might have grounds to file a first-party bad faith claim and recover compensation for your losses.

Not all insurance companies use bad faith practices to deny claims. Here are a few examples of legitimate reasons:

• You were at fault for the damage.
• The claim exceeds your maximum policy coverage.
• Your insurance company was not notified in the specified timeframe.
• The cause of the damage is undetermined.

Third-Party Bad Faith

A third-party bad faith claim is filed against another person’s insurance company. A relevant example is when a car accident victim files a lawsuit against the at-fault or liable person’s insurance company. Similar to a first-party bad faith claim, a third-party bad faith claim is used to recover financial losses when the responsible policyholder’s insurance company carelessly or intentionally mishandles your claim.

Offering a smaller settlement than the claim is worth, refusing to pay a valid claim, or delaying and denying decisions on claims or requests are all possible bad faith actions. When in doubt, asking a knowledgeable insurance dispute attorney before taking further action is a practical consideration.

Why Do Insurance Companies Engage in Bad Faith Tactics?

Insurance companies are motivated by profit and do not always play by the rules. It does not help that most policyholders are not aware of their rights regarding insurance contracts. Insurers can disguise everyday claims decisions with intentional delay tactics and other strategies so policyholders drop a claim or accept a lowball settlement offer. In other cases, sometimes professional negligence causes claims hang-ups.

There are many different reasons insurance companies choose to engage in dishonest dealings.

A few common bad faith insurance practices could include:

• Choosing to put the insurance company’s profits over policyholders’ interests and wrongfully dragging out, denying, or rejecting claims to save money.
• Prioritizing efforts to maximize profits and minimize losses, encouraging employees to deny or lowball claim amounts to close claims faster.

A specialized attorney can assist with filing a bad faith insurance lawsuit and stop unethical insurance companies from financially hurting more people.

When is an Insurance Company Acting in Bad Faith?

Insurance companies do not always tell the truth, but most people are on the outside looking in and have no way of knowing right from wrong.

Your insurer might be stringing you along if they:

• Make changes to the policy without your knowledge and misrepresent relevant factors or policy information to mislead you.
• Use undue delays to stall the communication process enough to cause frustration and force you to drop the claim or accept a lesser settlement offer.
• Delay the investigation process or fail to properly investigate the claim, leading to a quicker resolution in the insurance company’s favor.
• Hassle you for requests like excessive paperwork or documentation to drag out the claims process longer.
• Use illegal or fraudulent practices to avoid a payout, such as wrongful threats or misrepresenting the law or contractual terms.
• Deny a valid claim without a reasonable explanation.
• Use inaccurate or out-of-date law or factual arguments to deny payment, such as doctored disclaimers or other jargon to cause confusion and frustration.
• Refuse to make you a reasonable settlement offer and use excuses such as claiming your property damage was due to normal “wear and tear” or inadequate maintenance.

How to Sue an Insurance Company for Bad Faith

Insurance companies have the power, money, and resources to drag out claims for months — even years. In other cases, insurers might deny only a portion of your claim, so you can request an additional review or go through the appeals process. If there is no resolution after these steps, it is likely time to contact a lawyer specializing in bad faith insurance claims. They can help prevent you from losing any more time or money.

A bad faith lawyer can take over communication with your insurance company and likely arrange a fair settlement by filing a demand letter and negotiating with the insurer. Sometimes legal intervention is what is needed for insurance companies to budge. In other cases, evidence of a bad faith insurance experience can warrant a lawsuit as it is a breach of contract and may be an intentional infliction of emotional distress.

Evidence to Support a Bad Faith Insurance Claim

Bad faith lawsuits typically involve premeditated actions, and it is up to an experienced bad faith lawyer to prove bad faith exists, including proof that the insurance company withheld benefits owed under the policy and that the company was unreasonable in its withholding of benefits.

A bad faith insurance claim attorney can recover significant financial losses on your behalf with enough substantial facts using the following:

• Insurance policy and coverage details, including exclusions and limitations, and related documents like company policies and procedures regarding your insurance company’s claims process.
• The insurance company’s filing of your claim, including the submission, investigation, resolution, and appeals process, if applicable.
• A testimony from third-party witnesses like actuaries, risk management experts, and other insurance industry consultants who can report and testify on insurance policy interpretation, coverage analysis, and wrongful denial of insurance claims.

With any suspicion of bad faith, you must gather information and document every detail, like any written communication with your insurance company and copies of claim denials or rejections, to name a few things.

Bad Faith Insurance Claim: Applicable Damages

Different types of damages or compensation are available to a policyholder in a bad faith insurance claim. When suing an insurance company for bad faith, policyholders might be awarded compensatory damages to recover costs for economic and non-economic losses.

Economic damages can help cover expenses related to tangible things like property or medical treatment after an accident or illness. Some cases might result in financial compensation for non-economic damages like pain and suffering, mental distress, and loss of consortium.

Punitive damages are more typical in bad faith insurance cases as they have intentional misconduct in common. Policyholders might be eligible for punitive damages and potentially large sums of money to recover financial losses caused by the insurance company’s hand.

Damages are meant to discourage wrongful practices and return the policyholder to a similar financial position as before the incident.

Fight Bad Faith Insurance Companies Today

Undoubtedly, bad faith insurance disputes can get ugly as they fuel insurance companies’ bottom lines and leave policyholders in financial turmoil. Many insurers fail to uphold their contractual obligations as they are more committed to deceptive practices and profit.

These abusive tactics do not have to take away your right to insurance coverage, as a bad faith claims lawyer can help you file a bad faith insurance lawsuit, recover damages, and get your future back. It is time to fight bad faith insurance.

Mike

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