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:

1. Undue delay in handling claims
2. Inadequate investigation
3. Refusal to defend a lawsuit
4. Making threats against an insured
5. Refusing to make a reasonable settlement offer
6. Making unreasonable interpretations of an insurance policy.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. An insurance company owes a duty to the insured to exercise the utmost good faith.
13. The insurer must act in good faith and be diligent in its effort to negotiate a settlement.
14. 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.
15. Florida courts intend the burden to initiate settlement discussions be borne by the insurer, not the injured party.
16. 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.
17. 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.

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.

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.