Insurance Bad Faith
An insurance company has many
duties to its insured (consumers like you - the policyholder), including:
(1) a duty to defend a claim
(or lawsuit) even if some or most of the lawsuit is not covered by the insurance policy,
and
(2) a duty of indemnification,
which is the duty to pay a judgment against the policyholder, up to the limit of coverage, but
only if the judgment is for a covered act or omission.
As a result, most insurance
companies exercise a great deal of control over litigation.
The insurance company has a duty
to deal fairly with consumer-policy holders. Every insurance contract contains an unwritten
covenant or promise of good faith imposed by law upon the insurance company to always act fairly
towards its consumer-policy holders in handling their claims. Insurers must always meet the
reasonable expectations of the policyholder as well as give as much if not more consideration to
the financial interests of its consumer-policy holders than it does to its own financial
interests.
The law requires insurance
companies to act in good faith and to deal fairly with the insured person. This means that when a
person files a claim of loss, the insurance company cannot make up a reason to deny the claim or
look for ways to escape its obligation to pay. Instead, the insurance company must promptly and
reasonably review the claim when deciding whether to pay it.
When the insurer acts improperly,
then an insurance claims attorney may be able to take legal action on your
behalf.
Bad Faith
Claim
“Bad faith” refers to an insurance
company’s failure to act in good faith. An insurance company can commit bad faith in virtually any
kind of insurance claim:
- Life insurance
- Health insurance
- Auto insurance
- Homeowner’s
Insurance
- Hurricane Insurance
- Flood Insurance
- Hazard Insurance
- Commercial
Insurance
Examples of bad faith insurance tactics
include:
- Undue delay in handling
claims
- Inadequate
investigation
- Refusal to defend a
lawsuit
- Making threats against an
insured
- Refusing to make a reasonable settlement
offer
- Making unreasonable interpretations of an
insurance policy.
- An insurance company acts in bad faith in
failing to settle a claim against its insured when, under all the circumstances, it could
and should have done so, had it acted fairly and honestly toward its insured and with due
regard for his interests.
- An insurance company has a duty to use the
same degree of care and diligence as a person of ordinary care and prudence should exercise
in the management of his or her own business.
- When the insured has surrendered to its
insurer, all control over the handling of the claim, including all decisions with respect
to litigation and settlement, then the insurer must assume a duty to exercise such control
and make such decisions in good faith and with due regard for the interests of the
insured.
- Good faith obligates an insurer to advise
the insured of settlement opportunities, to advise as to the probable outcome of
litigation, to warn of the possibility of an excess judgment, and to advise the insured of
any steps he might take to avoid same.
- The insurer must investigate the facts,
give fair consideration to a settlement offer that is not unreasonable under the facts, and
settle, if possible, where a reasonably prudent person, faced with the prospect of paying
the total recovery, would do so.
- An insurance company owes a duty to the
insured to exercise the utmost good faith.
- The insurer must act in good faith and be
diligent in its effort to negotiate a settlement.
- Where liability is clear and injuries are
sufficiently severe that a judgment in excess of policy limits is likely, an insurer has an
affirmative duty to initiate settlement negotiations.
- Florida courts intend the burden to
initiate settlement discussions be borne by the insurer, not the injured
party.
- An offer to settle is not a prerequisite
to the imposition of liability for an insurer’s bad faith refusal to settle, it is a factor
to be considered.
- An insurer may be found to have acted in
bad faith for delaying an offer to settle.
The key issues as far as proving
the existence of a bad faith claim are:
-
insurance company had no reasonable basis
for denying a claim
-
insurance carrier either knew or
should have known there was no basis for denial of the claim
-
insurance company acted with reckless
disregard for the facts or the insured's rights
-
as a result of this misconduct, the
insured (policyholder) was damaged.
The insurance company may be held
liable for compensatory damages, as well as punitive damages acting in bad faith.
Bad Faith
Claim
Insurance companies are taking a
calculated, financial, risk. Insurers try to take in as much in premiums as they can pay out
as little as possible in claims - always.
Consider, insurers receive
thousands of claims every day many of which they simply deny. Many of these claims are
wrongfully denied. Very few consumer insureds will dispute the wrongful denial. The insurance
company saves lots of money with every undisputed denied claim. Act this way over thousands of
claims and the money kept/saved by the insurer just in denials is huge.
Occasionally, a
consumer-policyholder will fight and ultimately, win. That consumer could win millions of dollars
in damages. To the insurance company, any such damage award is far less than the amount they would
have spent honoring those other thousands of claims they wrongly denied.
The result, acting in bad faith -
on purpose - and getting caught only occasionally by a consumer, earns the insurance company
vast sums of money.
Bad Faith Lawsuit
An insurance policy is a contract
between the insurance company and the insured - the person bought the insurance. Both parties are
required to follow the terms of the contract and must act in good faith.
If a legitimate claim is filed,
but then denied, the insurance company is in breach or violation of the contract. The insured can
then file a law suit for the damages that should have been paid on the claims, and might be able to
collect the additional expenses that arise out of suing the insurance company, like court costs and
attorneys fees.
Not only can the
consumer-policyholder file a lawsuit, but may file a complaint with the regulatory body in the
State, e.g. State Insurance Commissioner or Insurance Department. Here's a list of Insurance
Commissioners for every State: National
Association of Insurance Commissioners (NAIC).
In Florida, the agency regulating
insurance companies is the Florida
Department of Financial Services.
Sometimes, filing a complaint with
an administrative agency such as FDFS is a requirement before filing a bad faith lawsuit. You
should consult an attorney.
Insurance Bad Faith
If you have been the victim of an
insurance company’s bad faith, then contact a consumer injury attorney
at our law firm regarding your bad faith claim. You may be eligible to receive compensation
for your losses due to the injurer's misconduct.
We may team up with, co-counsel, or jointly
prosecute, your bad faith claim with an insurance claims attorney whom we know and trust. We are
sensitive to your needs, share your values, and work hard for you and your family to secure
justice.
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