Insurance Bad Faith – What Is It Exactly?
Insurance bad faith, also called insurance fraud, is a term that refers to the mistreatment consumers and businesses get from their insurance companies. It is often used in situations where an insurance company refuses to pay out a settlement to an insured individual or entity.
Insurance bad faith unfortunately occurs ever so often. Plenty of insurance companies depend on statistics when determining how much must be paid out, depending on the given circumstances. Even if the policy entitles the insured person a certain amount of money, the insurer may refuse to pay it fully. The individual or entity either accepts the decision of the insurer or goes to court for bad faith.
Below are the three common scenarios involving insurance bad faith:
> insurer denying an insured party all the benefits stated in the insurance policy;
> insurer providing less compensation than what is guaranteed by the policy; and
> unwarranted payment delays.
Each insurance contract comes with a stated or implied “covenant of good faith and fair dealing.” That means both parties have their respective obligations to follow what is stated in the contract.
This contract dictates that the insurance company compensate the insured party fully and in timely fashion when it is appropriate, where failure to do so is tantamount to violating the good faith and fair dealing covenant. In some states, there are statutes or other regulations that govern bad faith by insurance firms.
Companies exhibiting bad faith may be subject to government-imposed penalties, punitive damages and statutory damage. Different laws affect bad faith claims in different states, so anyone having related problems with their insurers should talk to a lawyer.
Depending on the jurisdiction, an insurance company may have to pay different bad faith damages. Generally, the damages will be equivalent to the compensatory damages an insured party would have received from the insurer a non-bad faith setting. A lot of states also allow for punitive damages, or damages intended to punish the insurance company for bad conduct. In some states, there are limits to how much may be claimed in punitive damages; in others, there are none. With insurance fraud or bad faith being complicated and thus confusing, anyone who may want to court because of such experience must seek a lawyer’s help.
This type of case is usually accepted by an attorney on a contingency basis. That means the attorney will not be receiving payment directly from the client – not even from the award of damages he receives – but rather from the money that the court will order the insurer to pay the lawyer in a separate judgment.
If you think your insurance provider has acted in bad faith on your policy claim, see an insurance lawyer who can outline the possible steps you can take against the company.