Top 8 Signs of Insurance Bad Faith
Protect Against Insurance Bad Faith Conduct
People pay good money to insure themselves, their life, their health, their home, their business, their car, and more and they buy insurance policies to protect their investments. When the necessity arises and an insured needs to file a claim, insurance companies should treat insurance policyholders fairly and compensate accordingly. This treatment is called “in good faith.” However, if and when an insurance company doesn’t treat the insured fairly, that’s considered “bad faith.” Insurance bad faith is generally when insurance companies don’t uphold their end of the bargain and fail to properly care for their policyholders. Insurance companies are businesses and like many profitable businesses, they are driven by money with a bottom line to protect and of course want to save as much money as possible. However, doing this at the expense of a policyholder is not acceptable.
Like other businesses, insurance companies follow laws pertaining to their line of work and the laws specific to the insurance industry including those meant to address consumers’ issues and those which address the action of insurance company employees, agents and brokers. These laws are intended to provide balance between the individual consumer and the insurance company. For instance, there are laws pertaining to the sale, content, underwriting, rate and claims payments and though highly regulated, it is not error-free, mistakes can still be made. Unfortunately, the reality is, an insurance company may still engage in unethical business practices. An attorney can usually help identify when a mistake is made and when an insurance company may be taking or have taken advantage of the consumer.
Unethical Behavior by Insurance Company
Sometimes it is hard for the insured to know or to determine if they have been treated fairly by an insurance company or if their claim has been wrongfully denied. This is when it is best for the policyholder to get a legal consult so an experienced lawyer can examine the facts and advise them on how to address the problem and move the insured to the next step. Insurance lawsuits most often involve breaches of contract. Which means if the insured’s claim was valid and their insurance company has wrongfully denied it, the company breached its contractual duty to reimburse them for a legitimate claim. For example, per the Nevada Supreme Court, “if an insurer fails to adequately inform an insured of a known reasonable settlement opportunity, the insurer may breach its duty of good faith and fair dealing.”
Bad Faith Insurance Practices
If an insurance company acts in bad faith and intentionally doesn’t pay a legitimate claim as opposed to making a mistake, the insurance carrier may be subject to punitive damages. Punitive damages serve not only to compensate the insured for a particular loss but also to punish and deter an insurance company’s bad behavior and encourage fair business practices.
The following are some warning signs/examples of bad faith insurance claims settlement practices.
Top 8 Examples of Insurance Bad Faith Conduct
- Denial of claims or failure to affirm/deny coverage of claims without reasonable cause or within a reasonable time upon receipt of claim and/or proofs of loss
- Discounting or settling claim for much less than is a reasonable amount and/or not offering a fair and reasonable evaluation of damages most times so that litigation is necessary to recoup the correct amount
- Delays the process of filing a claim in any way for example like asking for reports and paperwork that is not necessary to file the claim just to delay process of payment
- Failure to notify insured of its decision to pay a covered claim or make a settlement offer without the insured’s knowledge and approval or without providing any statement or clear indication as to the specific coverage this payment is being made
- Deliberate or unreasonable misinterpretation of records or policy language to avoid coverage
- Canceling or changing the policy after the claim is filed and under new terms denies the claim
- Not using formal and proper investigative techniques i.e. use of fraudulent or illegal investigative processes
- Wrongful accusations of deliberate self-injury, arson or other to collect
Whether an insured individual pursues an issue regarding an insurance company or a bad faith claim through a lawyer or not, any policyholder always has the right to file a complaint and report abusive practices to the Nevada Department of Insurance.