What Is Insurance Bad Faith?
Insurance bad faith, also called insurance fraud, is a term that refers to the mistreatment consumers and businesses get from their insurance companies. It is often used in situations where an insurance company refuses to pay out a settlement to an insured individual or entity.
Unfortunately, insurance bad faith is something that happens often. A lot of insurance companies make use of statistics to know how much they need to pay out, depending on particular circumstances. Even if the policy entitles the insured person a certain amount of money, the insurer may refuse to pay it fully. That means the individual or entity can either accept the decision by the insurer or take the matter to court for bad faith.
Below are the three common scenarios involving insurance bad faith:
> insurer denying an insured party all the benefits stated in the insurance policy;
> insurer providing less compensation than what is guaranteed by the policy; and
> unreasonable delays in payment to insured party.
Every insurance contract comes with a “covenant of good faith and fair dealing,” which may be implied or directly stated. That means the two parties, the insurer and insured, have to comply with all the terms of their contract.
This contract dictates that the insurance company compensate the insured party fully and in timely fashion when it is appropriate, where failure to do so is tantamount to violating the good faith and fair dealing covenant. There are states that have statutes or other regulations that cover bad faith by insurance providers.
Companies exhibiting bad faith may be subject to government-imposed penalties, punitive damages and statutory damage. Bad faith claims are affected by different laws in different states, so anyone dealing with related issues with their insurers must talk to a lawyer.
Insurance companies pay different bad faith damages, depending on the jurisdiction. In general, the damages will be equivalent to the actual compensatory damages the insured would have rightfully obtained from the insurer in a non-bad faith setting. A lot of states also allow for punitive damages, or damages intended to punish the insurance company for bad conduct. Some states put a limit on the amount of punitive damages that may be claimed, while in others, the sky is the limit. Because insurance fraud or bad faith can be a complicated and often confusing matter, anyone considering to go to court due to such experience must seek assistance from a lawyer.
This kind of case is typically accepted on contingency basis by an attorney. That means the attorney will not be receiving payment directly from the client – not even from the award of damages he receives – but rather from the money that the court will order the insurer to pay the lawyer in a separate judgment.
If you think your insurer has acted in bad faith in relation to your policy claim, your first step is to see an insurance lawyer who can define the steps you must take.
Source: injury attorneys