What To Do If Your Insurer Acts In Bad Faith

Posted on: July 2, 2018

Insurance coverage is supposed to protect the insured from financial losses resulting from unexpected events, such as automobile accidents or the death of the family breadwinner. In other words, insurance companies have the duty to perform their contractual obligations by providing proper and timely compensation to their policyholders.
In California and many other jurisdictions in the United States, the law states that insurance companies owe a duty of good faith and fair dealing to those they insure. This obligation is often referred to as the “implied covenant of good faith and fair dealing”. However, when an insurance company fails to meet its end of the bargain by providing timely and proper compensation, then it could be said to have acted in bad faith.

Why Do Insurance Companies Act in Bad Faith?

Insurance companies are businesses, and like all businesses, they operate on the basis of profit. However, if an insurance company functions on this basis at the expense of their policyholders, then the latter may have legitimate cause to file a bad faith insurance lawsuit in order to recover the compensation they’re rightfully owed.

Bad Faith Insurance Tactics

There are a number of tactics insurance companies might employ to either avoid settling your claim or avoid paying the full coverage. These include:

  1. Lack of communication after you’ve filed your claim
  2. Deliberately delaying the investigation of your claim
  3. Deliberately misinterpreting its own provisions in the policy
  4. Making unreasonable demands relating to proof required of your losses
  5. Refusing to pay the policy limit and settle third party claims even if it’s the most
    reasonable solution

Filing A Bad Faith Insurance Claim

If your insurer is acting in bad faith by delaying or failing to settle your claim, then you have legal grounds to file a lawsuit against them. There are two ways your insurance company could be considered to have acted in bad faith:

  1. First party bad faith
    This happens when your insurer unduly delays the payment of your coverage. California laws dictate that all claims received by insurance companies must be acknowledged within 15 days; accepted or denied within 40 days; and, if accepted, settled within 30 days. If your insurer does not get back to you despite several follow ups, then a bad faith insurance claim is valid as there was an undue delay in providing you coverage.
  2. Third party bad faith
    This happens when your insurer is contractually obligated to cover the damages caused to third parties but fails to do so. An example would be a car accident where you were at fault. Bad faith occurs when the other party asks you for coverage and your insurer fails to coordinate with them or refuses to pay coverage even though it is within your policy. If the third party sues you for the damages, then you should contact a bad faith insurance lawyer to obtain just recompense for the damages and losses you’ve suffered.

Obtain Just Recompense For Your Losses

If you’re the victim of bad faith insurance practices, your insurer is liable for all the damages and losses you’ve suffered. These include attorney’s fees, costs of suit, and punitive damages due to bad faith. There are regulations for settling fair claims in California, which is why hiring an experienced bad faith insurance attorney in California is necessary to ensure a favorable outcome.