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We all have insurance of some kind. Whether it is auto insurance to cover us in case we are in an auto accident, or insurance to cover our property in case that is damaged. We pay our premiums on time and hope that in our moment of need the insurance company will step up and honor our claims when we need them. But all too often, these insurance companies do not honor the claims that are submitted to them. Insurance companies are a business, and they often times undervalue claims that should rightly be paid in order to save themselves money.
What is insurance bad faith?
Insurance bad faith occurs when an insurance company fails to honor an otherwise valid claim, or they undervalue a claim that has merit and warrants a higher payout. These insurance companies are very protective of their profits and will often times use unfair or deceptive practices to avoid paying. They use confusing language in policies, they delay much longer than they should, they make demands regarding proof of the loss which are so egregious that nobody could comply with them or they just fail to do a proper investigation into the claim. All of this may constitute a bad faith claim against an insurance company.
What is a good example of a bad faith claim?
Let’s say that your home is unfortunately burned by a huge fire and you have to contact your homeowner’s insurance to file a claim. After you contact them, the insurance company tells you that they are going to send someone out to look at the home and that person never comes. You cannot make any repairs to the home until someone comes out to look at the home and when they never show up, you are left hanging. This would be an example of bad faith. The insurance company was aware of a valid claim for damage to the home and they did not uphold their end of the bargain by coming out to inspect the property or pay on the claim. This would be what is called first party bad faith.
There is also a thing called third party bad faith. An example of third-party bad faith would be where an auto accident has occurred. Let’s say that you were driving down the road and you were drunk. You hit another vehicle and injure the person inside. You have an insurance policy which covers $50,000.00 in medical bills for the injured person. That person submits their medical documentation to your insurance company and the insurance company does not pay the full $50,000.00 even though the value of the claim is worth three times that amount. If your insurance company does not pay on the valid claim when they should have and then you are forced to pay out of pocket to defend yourself when you are sued individually, that would be a claim for third party bad faith.
What happens in a bad faith case?
In tort law, there is an implied covenant of good faith and fair dealing. Certain states have even enacted laws which expressly prohibit bad faith by insurance providers. If you are in a state where bad faith claims are forbidden by both common law and statutory law, you could bring a claim in both arenas. Bad faith is also forbidden by Federal Law. If the insurance company is found to have committed bad faith, they may be on the hook for damages which are in excess of the available policy limits. Damages that are available include: interest, damages for emotional distress, economic losses, damages for attorney’s fees as well as possible punitive damages. Punitive damages are typically calculated with relation to the insurance company’s wealth, not only the value of the claim and the actual losses.
What should I do if I feel like I have been the victim of insurance bad faith?
If you feel like you had a valid insurance claim which was not honored by your insurance company when it otherwise should have been, you may have a potential claim for bad faith. The attorneys at the Lopez Law Group will be able to examine the evidence that you have and look into the potential claim to see if you have a valid bad faith case. The laws surrounding bad faith are very complex and having an attorney on your side who knows the ins and outs of these laws is imperative. We can be reached at 727-933-0015 and are available to speak to you today. Our consultations as always are free, and we can tell you whether you have a valid claim for a potential bad faith case. Do not wait, call today!