Frequently Asked Questions About Bad Faith Insurance
Insurance companies have the upper hand when policyholders are not fully informed of their rights. We often find that claims handlers and insurance companies try to walk their insureds into uncovered claims even when the claim should be covered. In this regard it is important that you have your policy coverage reviewed and considered and seek legal advice as a claim arises. This page is intended to give you some key points about the rights of policyholders and when legal action against an insurance carrier may be warranted. Of course, every case is unique, so it is wise to consult with the knowledgeable legal team at Buscemi Hallett LLP if you have a dispute with an insurance company.
What is bad faith insurance?
When insurance companies unjustly withhold benefits, deny benefits, delay payment or fail to defend you in a lawsuit, the company may be acting in “bad faith.” Insurance companies can be sued for bad faith practices for a variety of reasons, including:
- Unwarranted denial of a claim
- Failure to conduct a reasonable investigation of a claim
- Failure to deny or pay the claim within a reasonable amount of time
- Failure to settle a claim
- Failure to defend a claim
- Offering to settle the claim for significantly less than the true value
- Failure to confirm to deny coverage within a reasonable amount of time
- Failure to provide full justification for denial of a claim in a reasonable amount of time
- Unreasonably requiring a policyholder to pursue legal action on a claim
- Abusive or coercive tactics
- Misrepresenting policy coverage or facts
- Failure to respond or timely respond
- Failure to properly investigate
- Failure to properly cite policy terms
- Misleading regarding deadlines or terms
- Undue delay in the claim process
- Unreasonable demands for proof of loss
- Forcing an insured to contribute to settlement
- Demanding a release in exchange for payment of claim
What remedies do I have if I feel an insurance company is acting in bad faith?
California law allows claimants to pursue recovery of full damages through a breach of contract and breach of the implied covenant of good faith and fair dealing (bad faith) lawsuit. In proper cases, claimants may be able to recover damages for emotional distress, attorney fees and punitive damages. The potential remedies depend on the facts of each case. It is also important to note that the attorney you enlist to represent you may impact the outcome. It is always wise to work with a lawyer who is familiar with these cases and has a record of success handling them.
What are examples of valid reasons a claim can be denied?
Common reasons for denied claims include:
- Damage that was not caused by an insurable event
- Failure to disclose information when you purchased or renewed a policy
- Failure to comply with a requirement or condition in the insurance policy
- Fraudulent activity on the part of the insured
- Policy cancellation by an insurer due to nonpayment or another valid reason
Nonetheless, even if there may be uncovered claims or uncovered portions of a claim, that does not mean a denial is valid. The law typically requires an insurer to defend any claim that is potentially covered or could be potentially covered. Often this means that when the bulk of the allegation is not covered, the carrier still has an obligation to defend you if any portion of the claim may be covered.
Likewise, insurance carriers often take aggressive positions regarding conduct of its insured and rely on information where it cannot meet its burden of proof in litigation. In this regard, it is very important not to simply rely on a denial as many of our cases have ultimately obtained coverage despite an initial denial by the insurance carrier. In fact, we want to review your denial of any claim.
How long will it take to resolve my bad faith insurance claim?
That’s a little like asking how long it takes to play a baseball game. Just as every ballgame is different, every legal case has its own unique set of facts, which means the amount of time required to resolve a bad faith insurance dispute varies. The process involves reviewing documents and requesting that the insurance company reviews its decisions. The insurance company may stand by its decisions or it may be willing to negotiate. If a fair agreement cannot be reached through negotiation, it may be necessary to proceed to litigation, which itself can take several months. These cases can be resolved relatively quickly or require an extended period to resolve.
What is meant by an insurance company’s duty to defend?
Part of what you pay insurance premiums for is to have the insurance company defend you against lawsuits. This means at any time you are sued in a lawsuit, or you become aware of a potential claim it is important that you consider your insurance coverage and provide timely notice. For example, if you are involved in a car accident, the other driver’s insurance company may make a claim against your insurance company for property loss or medical costs. If your insurance company is unable to reach an agreement on the proper amount of coverage, the other driver may file a lawsuit against you. Your insurance company must provide legal defense in this situation.
A car accident is usually a straightforward example but this concept applies to every suit or claim that may be filed or presented against you. Determining whether an insurer has a duty to defend requires careful review of the insured’s policy and the facts as pleaded by the claimant or any notice of information about a claim. It is wise to enlist the assistance of a lawyer who has experience with insurance disputes.
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We represent clients throughout Southern California from our office in San Diego. We take many cases on a contingency fee basis, which means we only get paid if you do.