Insurance company bad faith claim tactics can create problems for the policyholder who was injured by a third party or uninsured driver or for the policyholder who was at fault for an injury or wrongful death accident.
When an insurance company fails to pay a fair amount on a legitimate claim, the result can be financial disaster. For instance, if an insurer denies or lowballs a claim that deserves to be settled and the case against a policyholder goes to trial, it may result in a verdict that exceeds the value of the policy -- in which case the policyholder is responsible for the balance.
Auto insurance in particular is big business, and because liability insurance is required of every car owner by law, it means big profits for the companies that write the policies. The more premiums they take in and the fewer claims they pay out, the greater the profits they generate.
In addition to the claim a policyholder presents to an insurance company for property damage and bodily injury suffered in an accident, bad faith is a unique legal claim against the insurer for its actions. Go deeper on bad faith below.
BAD FAITH: Denying a claim for no reason.
When an insurance company denies a claim following an accident or injury, it should give a reason. If a policyholder's claim is denied for no reason or for an invalid reason, the insurer may have acted in bad faith.
BAD FAITH: Conducting an inadequate investigation.
The duty of good faith and fair dealing requires insurance companies to conduct prompt and thorough investigations into each claim. If an insurance company delays investigating a claim or conducts a poor investigation, it may well have acted in bad faith.
BAD FAITH: Delaying payment of a valid claim.
Insurance companies must pay claims within a reasonable time frame.
BAD FAITH: Offering less money than a claim is worth.
During the claim negotiation process, insurance companies often make lowball settlement offers. And when an insurance company refuses to budge from a lowball offer, it might be acting in bad faith.
BAD FAITH: Misrepresenting the law or policy language.
If an insurance company has intentionally misrepresented the law or language in the insurance policy applicable to an accident, occurrence, or injury claim, it has more than likely acted in bad faith. As part of the duty of good faith and fair dealing in the insurance contract, insurance companies must be honest and truthful in their statements about the law and the insurance policies involved in a claim.
BAD FAITH: Refusing to pay a valid claim.
If an insurance company refuses to settle or pay a valid claim after an accident, occurrence, or injury, it is likely acting in bad faith.