Insurance companies help provide protection and peace of mind for individuals against a broad range of risks. Whether you need the benefits you paid for through a homeowner’s insurance policy after a major storm or the long-term disability benefits you purchased through your employer after a catastrophic car crash, you expect to get the coverage and benefits you paid for, possibly for many years.
Unfortunately, insurance companies are often profit-driven organizations, which means they have a financial incentive to reduce how much they pay out on claims and how many claims they approve. Individuals with valid claims could find those claims denied due to bad faith insurance practices, which could require that they take civil action in order to secure the compensation they deserve.
What exactly is bad faith insurance?
Given that the financial profitability of an insurance company relies on limiting the payout on claims, there are many federal regulations that aim to promote fair and reasonable dealings between consumers and insurance companies. An insurance company has a legal obligation to approve a claim and pay it out in a timely manner if it clearly falls within the scope of the protections offered in a policy paid by a customer.
When an insurance company denies a valid claim, intentionally delays paying out on a claim or makes the settlement offer so low that it doesn’t reasonably cover the costs associated with the claim, they have engaged in bad faith insurance practices by intentionally violating the terms of their own policy.
What recourse do policyholders have in a bad faith insurance situation?
It may seem like an impossible task to attempt to appeal an insurance claim denial within the company after multiple employees have refused to cooperate with you. Thankfully, you don’t have to rely on the insurance company alone.
When you believe that they denied your claim in bad faith, you can potentially bring legal action against them. If the courts agree that their denial violated the terms of your policy, you can wind up with the compensation you needed when you filed your claim. In fact, the courts may also financially penalize the insurance company in order to remind them not to engage in the same questionable practices again in the future.