Bad Faith: When Insurance Companies Don’t Keep Their Promises

Policyholders pay insurance premiums to keep their policies updated on property they want to protect. In exchange for these payments, policyholders have a reasonable expectation that their insurance company will fulfill the terms of the insurance contract when they make a claim on their policy. In most cases, the insurance company will help the insured through the claims process, the damage will be assessed, and the claim will be handled quickly and fairly.

Unfortunately, insurance companies sometimes seek to increase their profits and save money by delaying, underpaying, and denying coverage to their policyholders. They use various tactics to avoid paying reasonable claims, including mailing out the wrong forms, dropping coverage, or denying claims outright, even when they know the claim should be paid. This is known as insurance bad faith.

What is Insurance Bad Faith?

Bad faith occurs when an insurance company treats its policyholders in an unreasonable or inequitable manner. According to most state insurance laws in the U.S., insurance companies have a duty to treat their policyholders fairly under the terms of their insurance policy, a binding contract.

Although insurance companies have the right to deny claims that are fraudulent or not covered by the policy, they are required to have a reasonable basis for the denial of a claim and are forbidden by federal and state law from acting in bad faith toward their policyholders.

Some Examples of Bath Faith Conduct

Some of the practices insurance companies engage in that are considered bad faith conduct include:

• Failing to quickly and comprehensively consider claims
• Intentionally misinterpreting policy language to avoid coverage responsibility
• Declining to resolve a claim or reimburse a policyholder for their entire loss
• Attempting to lowball or under-settle a claim
• Making unreasonable demands to ascertain proof of loss
• Unreasonably denying or terminating a claim without a valid reason
• Refusing to explain policy exclusions and provisions
• Failing to defend an insured who is facing litigation under a liability policy provision

Recovery in Bad Faith Cases

If you can prove that your insurer unjustly disallowed your claim and engaged in bad faith conduct, you may be eligible to recover damages under the provisions of the policy, and potentially the resulting losses and damages suffered for emotional harm, loss of income, attorney fees, and in cases in which the insurer’s conduct was flagrant or egregious, punitive damages might also be awarded.

If you believe that you have been the victim of bad faith on the part of an insurance company, contact a personal injury lawyer at O’Keeffe O’Brien Lyson Foss online, or call 701-235-8000 or 877-235-8002 (toll-free) today.

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