Insurance Bad Faith Claims

You’ve done your part by paying insurance premiums on time. People sign up for insurance so that they can be prepared for when the unexpected happens.

Bad faith law is designed to act as a balance to the unilateral power that insurers have when reviewing claims. An insurer has great power in the handling of claims, because the insured has no remedy for unjustified delay or denial of benefits due other than expensive and time-consuming litigation.  The bad faith tort seeks to protect insureds with valid claims against abuse of the insurer’s power by permitting the insured to recover tort damages in addition to amounts owed under the policy.    The law of bad faith represents a balance between two competing interests: the right of an insurer to reject an invalid claim and the right of the insured to receive payment for compensable claims.

Remedies for insurance bad faith

There are a number of potential remedies available if the insurer has committed bad faith. First, plaintiffs can recover damages for breach of contract, namely, the benefits due under the policy plus interest. In addition, plaintiffs may also be able to recover bad faith damages, which include consequential economic losses, emotional distress and attorneys’ fees. Plaintiffs may also be entitled to punitive damages if they can show the insurer acted with fraud, oppression, or malice.

Click here for a free consultation

When you file an insurance claim with an insurance company, by law, in any state, that company owes you a duty to act in good faith. Simply put, this means that the insurance company must look for ways to pay the claim, not look for ways to escape its obligation to investigate the claim or to pay you. Doing so would constitute bad faith. Bad faith claims and lawsuits may stem from one or more of a number of actions or in-actions by the insurance company from denial of coverage to failure to negotiate a settlement. Here are some of the typical reasons insurance companies get sued for bad faith:

  • Unwarranted denial of coverage
  • Failure to communicate pertinent information to the claimant
  • Failure to conduct a reasonable investigation of the claim
  • Refusal to pay the claim without investigating
  • Failure to deny or pay the claim within a reasonable period of time
  • Failure to confirm or deny coverage within a reasonable period of time
  • Failure to attempt to come to a fair and reasonable settlement when liability is clear
  • Offering substantially less money to settle than the true value of the claim
  • Failure to promptly provide a reasonable explanation for denial of a claim
  • Failure to enter into any negotiations for settlement of the claim
  • Failure to respond to a time-limited demand
  • Failure to disclose policy limits