What Constitutes a Bad Faith Insurance Claim?

June 26, 2020

Most people will deal with an insurance carrier at some point in their lives. After all, most of us have some type of insurance policy that we pay for or are covered under. This can include automobile insurance, homeowners insurance, business insurance, and more. Insurance carriers are typically the entity in charge when it comes to settling the claim. These carriers have more expertise, financial resources, and negotiating experience than the policyholder. State law requires that insurance carriers operate in good faith and fair dealing for every policy they have.

However, there are times when insurance carriers fail to act responsibly when processing, investigating, or paying a claim. If the insurance carrier’s conduct is egregious, they may be acting in bad faith. It may be time to consider enlisting the help of an experienced Martinsburg insurance bad faith lawyer.

What are the Elements of Bad Faith Insurance Practices?

When an insurance company fails to handle each claim fairly and reasonably (in good faith), the Arizona Supreme Court has held that the insured is not limited to the damage provisions in their contract with the insurance carrier. This will allow the insured to bring an action for damages above and beyond the original insurance claim, including punitive damages against the insurance carrier.

There are various ways that insurance carriers may be guilty of bad faith insurance practices. This can include the following:

Denying a Claim Without Giving a Reason

Insurance carriers are required to give a reason for denying a claim. If the insurance carrier denies a claim without giving any reason, or if they deny a claim for an invalid reason, then the insured may have a claim of bad faith against the insurance carrier.

Failing to Conduct a Prompt and Complete Investigation

Insurance companies are required to conduct a prompt and complete investigation into all valid claims made by their policyholders. Essentially, the insurance carrier is acting as the “agent” of the policyholder in these instances. If the insurance carrier fails to properly investigate a claim, it may be acting in bad faith.

Offering Less Money than the Claim is Worth

While it is not uncommon for an insurance carrier to offer low settlements, an insurance carrier could be acting in bad faith if they intentionally make a “lowball” offer to the policyholder.

Delaying or Denying Decisions on Claims or Request for Medical Care

Insurance carriers are well aware that approving medical requests in a timely manner is vitally important for injury victims. If a doctor has prescribed care that they believe is reasonable and necessary, then the insurance carrier has a duty to act on that request promptly. If the insurance carrier unreasonably delays or even denies a claim, this could be bad faith conduct.

Refusing to Make a Valid Claim

If a policyholder submits a valid claim to their insurance carrier, but the carrier refuses to settle or pay the claim, they may be acting in bad faith. It is vital that the policyholder obtain a complete copy of their policy and understand whether or not they have a valid claim.

Making Threatening Statements

If an insurance carrier makes any threatening statements towards a policyholder, they could be guilty of bad faith. An example of this could be an insurance carrier accusing a homeowner of filing a valid claim after sustaining fire damage to their home.

Misrepresenting the Policy Language or the Law

The laws and language in an insurance policy can be complicated. An insurance carrier may use this to their advantage. If the carrier purposely misrepresents insurance laws or the language of the policy, this would be considered bad faith practices.

Putting Insurance Carrier Profits Over a Policyholder’s Claim

Insurance carriers are typically “for-profit” entities, but they should never put their drive for profit above a policyholder’s valid claim. Anytime an insurance carrier denies or delays a valid claim in an effort to boost their bottom line, they are breaking the law.

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