Insurance Bad Faith – What Is It Exactly?
Insurance bad faith, which also goes by the term, insurance fraud, refers to the mistreatment of consumers and businesses by their insurance carriers. It often applies to cases in which an insurance company does not want to pay out a settlement to an insured person or entity.
Unfortunately, insurance bad faith is something that happens often. A lot of insurance companies make use of statistics to know how much they need to pay out, depending on particular circumstances. Even if an insured person is entitled to a certain amount of cash, the insurer may still not want to pay it in full. The individual or entity either accepts the decision of the insurer or goes to court for bad faith.
Three of the most common scenarios involving insurance bad faith are:
> insurer denying an insured party all the benefits stated in the insurance policy;
> insurer providing less compensation than what is guaranteed by the policy; and
> unjustified delays in payment to insured.
Each insurance contract comes with a stated or implied “covenant of good faith and fair dealing.” That means the two parties, the insurer and insured, have to comply with all the terms of their contract.
This contract provides that the insurance firm should fully compensate the insured party in timely fashion under appropriate circumstances; otherwise, the company is considered to be in violation of the covenant of good faith and fair dealing. There are states that have statutes or other regulations that cover bad faith by insurance providers.
When bad faith is exhibited by these companies, they may be subject to punitive damages, government penalties and statutory damage. Because there are different bad faith-related laws in different states, it is important for anyone with these issues to consult with a lawyer.
Insurance companies pay different bad faith damages, depending on the jurisdiction. In general, the damages will be equivalent to the actual compensatory damages the insured would have rightfully obtained from the insurer in a non-bad faith setting. A lot of states also allow for punitive damages, or damages intended to punish the insurance company for bad conduct. In some states, punitive damages come under a cap, but not in other states where there are no limits. With insurance fraud or bad faith being complicated and thus confusing, anyone who may want to court because of such experience must seek a lawyer’s help.
Lawyers who accept this type of case usually work on a contingency basis. That means the attorney will not be receiving payment directly from the client – not even from the award of damages he receives – but rather from the money that the court will order the insurer to pay the lawyer in a separate judgment.
If you think your insurance provider has acted in bad faith on your policy claim, see an insurance lawyer who can outline the possible steps you can take against the company.
Source: injury attorneys