When you sign an insurance policy, you create a contract between yourself and the insurance company. You agree to make your insurance payments on time and follow the requirements for making claims. You expect the insurance company to honor your claims and pay what they promise.
Insurance policies include an implied or express covenant of good faith and fair dealing. This means that the insurance company must treat clients honestly and in accordance with the terms of the policy. If the policy must be denied for any reason, the company must explain why and provide an opportunity for appeal.
When an insurance company violates this covenant, it is said to be dealing in bad faith. Bad faith can be defined as dishonest dealing, fraud, or misrepresentation. Clients affected by bad faith dealing may have a claim against the insurance company for more than the amount of the original claim.
Frequently Asked Questions About Bad Faith Insurance Claims
These are some of the most common questions about bad faith insurance claims. If you believe your insurance company has been dealing in bad faith with you, contact your attorney immediately.
What are some kinds of bad-faith insurance claims?
Some of the most common bad-faith insurance practices include:
- Denying, discounting, or delaying payments without a reasonable basis
- Failing to conduct proper investigations into claims
- Failing to affirm or deny coverage
- Making excessive or repetitive demands for documentation
- Misrepresenting or omitting policy language
What is “low-balling” a claim? Is that bad-faith?
Low-balling a claim is when the insurer offers you an unreasonably low amount for your insurance claim. Although it is common and allowed for the insurer to look for the least expensive repairs or medical provider, they should not offer an amount that will not pay for all damages. Low-balling may be a type of bad faith dealing if it persists through the negotiations.
Can my insurance company deny my claim?
Yes, your insurer can deny your claim for many reasons. The most common reason is that the damage does not meet your deductible. If repairing the damage will only cost $300 and your deductible is $500, your claim will be denied. Other valid reasons for denial may include damage that is not covered by your policy, a claim in violation of your policy (such as a DUI), or late filing.
Your policy should allow you to appeal a denial. If your company is dealing in good faith, they should provide you with an explanation of the reason for the denial, and time to correct any filing errors or other issues with your claim. If your company does not give you a timely explanation, you should suspect a bad-faith claim.
I thought I was covered, but the agent showed me a clause that I don’t remember reading. Can they still deny my claim?
Insurance policies are notorious for being difficult to read. The language is intentionally obscure, and agents are often reluctant to explain what all the doubletalk means. However, if you believed you were covered for a certain type of damage and filed your claim in that belief, and suddenly there is language in your policy saying you are not, you should talk with an attorney.
Misrepresentation is a type of fraud. When you sign a contract, you should understand everything you agree to. If the insurance agent failed to explain one part of the policy, or intentionally left something out (omission), they were dealing in bad faith.
I think I was the victim of a bad faith insurance claim. What do I do next?
If you believe your insurance company is not dealing fairly with you, your first call should be to an attorney who specializes in handling insurance claims. Making a bad-faith claim against your insurance company is not quite like filing an ordinary insurance claim. Some states, like Texas and Louisiana, have specific statutes requiring good-faith dealing.
A bad-faith claim has aspects of insurance law and contract law. You first must prove that your claim was covered by your insurance and that it was wrongfully denied by your company. You also need to file your claim within the statute of limitations allowed by your state. Most states have a two-year statute of limitations for bad-faith insurance claims. However, this deadline begins on the date you first realized your insurer was dealing improperly. So don’t hesitate. As soon as you believe something is wrong, contact an attorney.
What can I expect to win from a bad-faith claim?
Unlike most tort claims, which seek only to make the claimant whole (that is, repair the damage), bad-faith claims are subject to punitive damages. In some states, you may be able to recover the amount of the denied claim, plus fees and costs, and punitive damages if it can be shown the company acted with fraud or malicious misrepresentation.
SOURCES:
Louisiana Revised Statutes 22:1973 https://legis.la.gov/Legis/Law.aspx?d=509087
Texas Insurance Code, Sec. 541 https://statutes.capitol.texas.gov/Docs/IN/htm/IN.541.htm
Morris & Dewett “Causes of Car Accidents” https://morrisdewett.com/car-accidents/causes-of-car-accidents/#can-i-rely-on-an-insurance-company-to-determine-the-causes-of-my-car-accident
Morris & Dewett “Texting and Driving” https://morrisdewett.com/car-accidents/texting-and-driving/#texas-louisiana-texting-driving-laws-bans
