Understanding Insurance Bad Faith
Insurance bad faith, also called insurance fraud, refers to the mistreatment of consumers and businesses by their insurers. It often applies to cases in which an insurance company does not want to pay out a settlement to an insured person 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 with the insured person being fully entitled to a certain amount, the insurer may not pay that money in full. 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 all promised benefits to the insured;
> insurer offering a compensation amount lower than the policy guarantees; and
> unjustified delays in payment to insured.
In every insurance contract, there is a “covenant of good faith and fair dealing,” which is either expressly stated or implied. That means the two parties, the insurer and insured, have to comply with all the terms of their 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.
When bad faith is exhibited by these companies, they may be subject to punitive damages, government penalties and statutory damage. Bad faith claims are affected by different laws in different states, so anyone dealing with related issues with their insurers must talk to a lawyer.
The bad faith damages paid by insurance companies are different, depending on the jurisdiction. Generally, the damages will be equivalent to the compensatory damages an insured party would have received from the insurer a non-bad faith setting. In several states, punitive damages, or damages meant to punish an insurer for bad conduct, also apply. In some states, there are limits to how much may be claimed in punitive damages; in others, there are none. Since insurance bad faith or fraud can be complex and confusing, anyone planning to go to court because of such experience should always consult with a lawyer.
Lawyers who accept this type of case usually work 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 insurer has acted in bad faith in relation to your policy claim, your first step is to see an insurance lawyer who can define the steps you must take.
Source: injury attorneys