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How to Tell if Your Insurance Company is Practicing Bad Faith

Written by AskTheLawyers.com™

How to Tell if Your Insurance Company is Practicing Bad Faith

Written by AskTheLawyers.com™

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Insurance bad faith refers to when an insurance company refuses or delays payment on a valid claim from a policyholder. This could include intentionally misinterpreting the policy rules to avoid having to pay a claim or arbitrarily demanding proof from the policyholder that is not necessary to the situation. Insurance bad faith can result in extreme monetary loss for those who don’t take action against the insurance company. Insurance policies are a promise of protection that policyholders pay to have, so when an insurance company fails to follow through on that promise, the financial injury to a client includes not only the claim itself, but also the money they spent on the original policy. Insurance companies practicing bad faith should be held accountable.

Insurance bad faith claims are serious. In fact, often the mere mention of a suspicion of insurance bad faith to the adjuster in question is enough to incite them to better behavior. However, if this doesn’t work, the policyholder should write a complaint letter of insurance bad faith to the insurance company itself and prepare to take legal action by seeking professional counsel. Insurance bad faith claims can be complex and confusing to file, and most policyholders who decide to do so benefit greatly from involving an attorney in their situation.

Here are some signs that your insurance company is practicing bad faith:

  • The adjuster you are speaking with seems to be intentionally misinterpreting their own policy language.
  • The adjuster appears to be deliberately misinterpreting your records.
  • The adjuster arbitrarily demands proof that is not pertinent to the validity of your claim.
  • The company seems to be creating unreasonable and repeating delays in paying your claim.
  • The company requests that you pay part of the settlement yourself outside of your preexisting agreement.
  • The company fails to conduct or attempt a thorough investigation of the situation.
  • The company fails to maintain adequate communication with you, including delaying communication or failing to respond to important questions.

In a successful insurance bad faith claim, the company may have to pay a greater amount to the policyholder than the original claim.

This is because the damages incurred from failing to receive a timely and adequate amount of compensation based on a client’s preexisting policy can be severe and far-reaching. While waiting for the insurance company to pay a valid claim, many policyholders suffer as they struggle to pay for immediate needs like medical bills, property damage costs, etc. out of their own pocket, not to mention the extreme emotional stress these situations often subject a policyholder to.

What can make the situation even more frustrating is that, in this situation, the policyholder has been paying an agreed-upon amount of money to the insurance company specifically to avoid the exact scenario they have now found themselves in. It is essential that a policyholder take action and pursue compensation for their damages when insurance bad faith is at play.

Three types of damages may be compensated in a bad faith claim:

  • Contract damages: Contract damages refer to the amount of money the insurance company already owed the policyholder for a valid claim.
  • Compensatory damages: Compensatory damages cover the suffering of the policyholder which occurred due to the insurance company’s bad faith (i.e. emotional distress, loss of reputation, financial hardship, etc.)
  • Punitive damages: Punitive damages are intended to punish the insurance company for its bad faith behaviors, hopefully deterring them from treating future policyholders in likewise unscrupulous ways.

Laws regarding bad faith insurance vary from state to state, so it’s a good idea to contact a lawyer and discover your rights for your state, as well as what kind of action you can take to recoup your losses due to the initial accident as well as the insurance company’s bad faith practices.

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