What is Bad Faith in Insurance?

bad faith insurance claim

When you are involved in a personal injury case, the insurance company has an obligation to settle your case in a prompt and fair manner. If they fail to do so, it can be referred to as acting in “bad faith,” and could have legal implications for punitive damages.

Suing Insurance Companies for Bad Faith

U.S. laws state that an insurance company has an obligation to deal fairly with individuals they insure, and the people they must pay claims to under insurance policies.

This obligation automatically exists in every insurance contract, and in cases where you believe the insurance company has not fulfilled this obligation, you have the right to sue them. In many states you also have the right to recover punitive damages in addition to attorney’s fees and other damages.

Determining Bad Faith

There is no specific national standard for overseeing insurance companies and defining what is considered bad faith, but there are some common themes in bad faith cases that we often see. These include, but are not limited to, an insurance company:

• Misrepresenting or failing to inform you about policy provisions that relate to your coverage

• Failing to acknowledge or respond to claims or communications promptly

• Failing to investigate claims in a reasonable time frame

• Denying claims or refusing to pay without a proper investigation

• Not responding in a prompt manner with a decision on whether to affirm or deny coverage after claims are filed

• Attempting to unfairly reduce the amount of money paid in a claim when the liability for the claim has clearly been demonstrated

• Offering to pay an amount that is unreasonably low, thus requiring that the insured or claimant take legal action to recover a fair amount

• Making any changes or alterations to claims or applications without the consent or knowledge of the claimant

• Trying to compel a claimant to accept a settlement lower than the amount that a reasonable person would believe is fair

• Delaying investigation or payment of claims without appropriate (and reasonable) explanations for doing so

Knowing Your Rights

An insurance policy is a contract—prepaid with premiums—between you and the insurer that constitutes a promise from the insurer to provide you with protection and compensation when necessary. If you believe that an insurance company is not acting fairly in your case, is offering a settlement that seems too low to be reasonable, or is ignoring your communication and claims without giving you a reason, you should know that you have the right to pursue a resolution, which may include punitive damages for egregious violations. Contact NW Injury Law Center today to find out more and to discuss your case.

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