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What is Insurance Bad Faith?

Insurance bad faith describes a claim made by a policyholder against their insurance company for the company's bad actions. In the United States, when an insurance company deals with a policyholder, they owe a duty to deal with them in good faith. According to the law, this is also part of every contract provided by an insurance company to a policyholder.

Elements

This situation involves when a claim is not being fairly handled and the insurance company is aware of the situation. It is possible for these actions to be considered a breach of contract or a legal tort.

To establish a legal claim an insurance company is operating in bad faith, a Tulsa insurance claim denial attorney knows it will be required to prove two main elements:

  • Benefits owed to a policyholder were withheld. They will need to prove their claim to the insurance was valid and based on the terms of their policy. The denial of the claim by the insurance company must be documented. A final demand to an insurance company for a fair claim settlement should be made prior to filing a lawsuit.

  • A policyholder must establish it was unreasonable of the insurance company to withhold benefits. In determining if an insurance company's actions were reasonable, they need to be objectively evaluated. This will be based on the facts of the case and the situation that existed when the insurance company engaged in their behavior.

Good Faith Covenant

A Tulsa insurance denial lawyer knows it is possible for a policyholder to sue an insurance company who has violated the fair dealing and good faith covenant. It is possible for them to recover for damages. They could even be awarded punitive damages if the insurance company's behavior was extremely egregious.

Factors

There are certain factors that are considered when trying to establish insurance bad faith. They are not conclusive proof, but they can help establish a policyholder does have a case.

  • Showing the insurance company denied the claim but did not provide a reasonable explanation for it.

  • The intentional misrepresentation of a provision in the insurance policy as well as other relevant facts.

  • Once a policyholder has submitted proof of loss, the insurance company fails to approve or deny their claim within a reasonable amount of time.

  • Once a claim is submitted, the insurance company fails to acknowledge it.

  • When it comes to the processing, or investigation of a claim, the insurance company fails to adopt and use reasonable standards to accomplish these tasks.

Statutory Bad Faith Claim

It is possible for a lawsuit involving insurance bad faith to involve statutory law. With a statutory claim, it is based on the laws made by the legislature of the state. There are laws by states put in place to protect insurance policyholders from insurance companies that engage in deceptive or unfair practices. These laws provide details about specific actions that are prohibited by insurance companies. The Aizenman Law Group knows how to use these laws to provide remedies for a policyholder who is the victim of insurance bad faith.

First Party

This involves an insurance company's refusal to pay a claim to a policyholder. This can happen when a policyholder contacts their insurance provider about a claim. An insurance company alleges they are not able to pay for any repairs until the claim is investigated. The insurance company makes no effort to investigate and confirm the policyholder's claim. This could be a reason for a policyholder to file a first-party bad faith insurance lawsuit.

Third Party

When an insurance company has bad faith behavior with a third party, it often involves liability insurance. An insurance company owes a duty to defend, as well as pay all the costs involved with a legal defense for a particular type of lawsuit. An insurance company must pay up to the limits provided in the policy.

Liable

Should an insurance company be proven to have acted in bad faith, it can be held liable for damages above the limits of a policy. These damages could include statutory penalties, attorney's fees, interest, consequential economic loss, emotional stress and more. They could also be required to pay punitive damages. The amount of these damages will be determined with regard to a policyholder’s losses but also the wealth of an insurance company.

Indemnification

This is the duty of an insurance company to pay any judgment made against their policyholder. It must be done up to the limit of the coverage of the policy. An insurance company's duty to indemnify exists for any omission or act listed as covered in the insurance policy. This will require a summary judgment in the policyholder's favor or a trial's factual record showing how much of a plaintiff's claim is covered by their policy.

Written Accusation

An insurance company will often pay close attention to a bad faith accusation put in writing. If the accusations appear to be true, it could quickly initiate a change in the position of the insurance company's adjuster when it comes to providing a settlement. Insurance companies know if it can be proven they acted in bad faith, the company may be required to pay damages at an amount much higher than a policy’s compensation amount.

In most cases, when settlement negotiations take place, the slightest possibility of an accusation of bad faith can help the process. It could motivate an insurance company to see the benefits of providing a reasonable settlement.

Should anyone believe they are the victim of an insurance company acting in bad faith, they should contact the Aizenman Law Group.

These are legal professionals with the knowledge and experience to analyze an insurance claim situation. They know how to negotiate a fair settlement from an insurance company and will not refuse to fight for your rights in court.

Contact today at (918) 215-8856 to get started on your free case evaluation.