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What constitutes ‘bad faith’ with an insurance company?

On Behalf of | Sep 19, 2022 | Insurance Matters

There are some kinds of insurance you have to carry under the law (i.e., you can’t legally drive without liability coverage). Other kinds of insurance are necessary because of contractual agreements. Your landlord may require that you carry renter’s insurance, or your mortgage company might require that you purchase a homeowner’s insurance policy. Many people and businesses also carry additional coverage for their own financial protection rather than out of legal obligation.

Insurance companies should uphold their policy contracts by providing appropriate compensation when individuals have valid claims. However, some insurance companies will operate in bad faith and fail to appropriately uphold the policies they underwrite. What constitutes bad faith insurance practices?

Trying to change your coverage after a claim

You should be able to rely on the exact coverage terms that you reviewed when purchasing the policy when filing a claim. Your insurance providers should not attempt to change either the policy limits or your responsibilities following a claim. Nor should they make misstatements about policy provisions. Within the limits set by the law, an insurer can change your policy term or how much you pay when you renew your policy, but they cannot do so for a claim that you are currently making.

Denying valid claims

Insurance agents will sometimes look for any excuse they can find to refuse to pay a claim. Sometimes, they may even fabricate an excuse in the hope that the claimant will give up and not pursue the matter any further. Insurance companies have an obligation to cover valid losses according to the policies that they create with their clients.

Delaying or minimizing policy payments

Sometimes, insurance companies will agree to pay a claim, but they will not pay what they should or offer a very low settlement. They may end up paying only a tiny fraction of the real value of the claim. Other times, the insurance company may delay issuing payments that are due or delay in payment agreed to settlement.

In a situation in which an insurance company should provide coverage and refuses to do so or does not fully uphold their agreement with the claimant, the the claimant may have grounds for a bad faith insurance claim. In a bad faith insurance lawsuit, you can potentially force the company to cover your claim. Additionally, the courts may grant you damages, penalties, and attorney fees in some circumstances.

Rather than giving up because an insurance company has a lot of resources to help it fight you in court, you may want to learn more about bad faith insurance and fight back when dealing with a denied or underpaid claim. Taking action when you suspect bad faith insurance practices will help you get the coverage that you have paid for and therefore rightfully deserve.