Insurance Bad Faith: Protecting Policyholders’ Rights

When you purchase an insurance policy, you expect your insurer to act in good faith and honor the terms of the agreement. Unfortunately, this doesn’t always happen. When an insurance company fails to fulfill its obligations, policyholders may find themselves dealing with bad faith practices. In this article, we explore what constitutes insurance bad faith, how it affects policyholders, and their rights in such situations.

What Is Bad Faith Insurance?

Bad faith insurance occurs when an insurer does not behave fairly or appropriately in handling a claim. It goes beyond simple mistakes or denials; it involves unreasonable or egregious actions that harm policyholders. Here are key points to understand:

1. Duty of Good Faith and Fair Dealing:
   • -Every insurance policy includes an implied covenant of good faith and fair dealing.
   • -This means both parties (insurer and policyholder) must act honestly, fairly, and in good faith to fulfill the terms of the contract.
2. Examples of Bad Faith Practices:
   • -Unreasonable Denial: Denying a valid claim without proper investigation or justification.
   • -Delay Tactics: Unnecessarily delaying claim processing or payment.
   • -Underpayment: Offering less than the rightful amount for a covered loss.
   • -Failure to Investigate: Ignoring evidence or refusing to investigate a claim.
   • -Misrepresentation: Providing false information or misleading policyholders.

Proving Bad Faith

To make a successful bad faith insurance claim, generally policyholders must demonstrate:

• Improper Behavior: The insurer acted unreasonably or egregiously in handling the claim.
• Beyond Mistakes: It’s not just about simple errors; bad faith involves intentional or reckless actions.
• Breach of Duty: The insurer violated its duty of good faith and fair dealing.

Remedies for Policyholders

When faced with bad faith practices, generally policyholders have several options:

• Legal Action: File a lawsuit against the insurer for bad faith.
• Damages: Seek compensation for actual damages (e.g., unpaid claims, financial losses) and, in some cases, punitive damages.
• Regulatory Complaints: Report the insurer’s behavior to state insurance departments.

Protecting Your Rights

As a policyholder, be aware of your rights:

1. Review Your Policy: Understand your coverage and obligations.
2. Document Everything: Keep records of communications, claim details, and any unfair practices.
3. Consult an Attorney: If you suspect bad faith, seek legal advice promptly.

Remember, insurance companies have a duty to act in good faith. If you believe your insurer is violating that duty, take action to protect your rights and seek the compensation you deserve.

At Brubaker Injury Law, we’re here to help you navigate the complexities of your case. If you’ve been mistreated by an insurance carrier, don’t hesitate to reach out to us. We’re here for you.