Insurance Bad Faith

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It’s easy to feel powerless when dealing with insurance companies. While they have a duty to pay for covered losses or expenses, it’s the insurer that often determines exactly what is covered (such as with health insurance) or the value of your loss (as in auto or homeowner’s insurance cases). They also control the timing of payment.

Laws Requiring Insurance Companies to Practice Good Faith

However, you are not powerless. Insurance companies have a duty to practice good faith in dealing with both their insured and people making claims against their insured. This obligation arises from two different sources. First, all contracts impose on both parties an obligation to act in good faith—and since insurance is a contract, it is subject to that obligation. Second, many states have laws that impose a duty of good faith on insurance contracts specifically, reinforcing the general contractual obligation

Complaints for Bad Faith Insurance

Subject to the legal obligation to deal in good faith, insurers cannot arbitrarily decide what or when to pay. In fact, unreasonably delaying payment is one of the most common ways that insurers show bad faith; another common way is what’s known as “post-claim underwriting,” which is when an insurer, after happily taking your premiums for months or years, decides only after you file a claim to re-evaluate whether you should have qualified for insurance in the first place. (It’s hard to imagine a clearer example of bad faith than that.) A third type of insurer bad faith is low-balling repair estimates or the value of property which was damaged or destroyed.

Bad Faith Insurance Claims

If insurers do not act in good faith, they may be liable to you. Insurance bad faith is essentially insurance fraud on the part of the insurer; it is something you can sue over. That’s the good news—you have rights. The bad news is that enforcing them is not always easy. What constitutes “good faith” is, by definition, both somewhat subjective and also context- or situation-dependent. There is no hard-and-fast rule for what is reasonable or fair.

Also, enforcing your rights—making a claim for bad faith dealing—generally involves bringing or at least initiating a legal action against the insurance company. After all, if they’re acting in bad faith, they’re not going to come clean and pay you what you’re due unless you force them.

How a Lawyer Can Help

This is where an attorney can help you. A lawyer who is an insurance bad faith expert can help you evaluate whether you have a claim; what it might be worth—if the insurer is acting in bad faith, you can often recover more than the original insurance claim—and then represent you against the insurer. It’s not impossible to pursue a claim like this yourself, but it is much more difficult—and you almost certainly will not recover as much as if you had an experienced attorney in your corner.