When someone files a legitimate insurance claim, they likely expect their insurance company to respond fairly and promptly. Unfortunately, this does not always happen. Some insurers act in “bad faith” by unreasonably denying or delaying valid claims, leaving policyholders without the support they have paid for (and that they are entitled to under the law). When an insurance company acts in bad faith, it may potentially be held legally accountable via a civil lawsuit.
Bad faith insurance conduct occurs when an insurer breaches its duty to act honestly and fairly toward its policyholder. Insurance policies are contracts, and insurance companies are legally required to investigate, evaluate and resolve claims in good faith, subject to the terms of a policyholder’s contract. While not every denial of an insurance claim qualifies as bad faith, certain behaviors cross the line from ordinary disputes into unlawful conduct.
Examples of bad faith may include failing to investigate a claim thoroughly, misrepresenting policy terms, denying coverage without a valid reason, offering unreasonably low settlements or deliberately delaying payment. In some cases, insurers may even pressure claimants to accept less than what is owed or hope that delay tactics will force a person to give up on a claim entirely. For example, if someone is injured in a car accident and their insurer offers a settlement far below what the injuries are worth, despite clear evidence of harm, that may be a legally actionable bad-faith denial.
Taking action after an unfair denial
Proving bad faith requires more than just showing that an insurance company has made a mistake. The insured must typically demonstrate that the insurer acted unreasonably or dishonestly. If an egregious instance or pattern of neglect, manipulation or outright refusal to honor obligations is found, a lawsuit may be warranted.
In a successful bad faith insurance claim, a policyholder may be entitled to more than just the original value of their claim. Courts can award additional damages, including compensation for emotional distress, lost income due to delayed payments, legal fees and even punitive damages in cases of particularly egregious behavior.
Many insurance companies count on most policyholders not knowing their rights. If you suspect your claim was unfairly denied, undervalued or delayed, it is wise to speak with a legal team experienced in matters of bad faith.
