What Is Insurance Bad Faith? Know Your Rights
Years Of Dealing With Bad Faith Insurance At Your Service
Early in my career, I worked as an insurance defense lawyer, which gave me valuable insight into how insurance companies operate. One of the most important lessons I learned is that, contrary to what many believe, the insurance company is not your friend when it comes to handling claims.
There’s an inherent conflict of interest between the insurance company and its insured because while policyholders expect protection, the company’s priority is maximizing profits for their shareholders. Understanding this dynamic helps me navigate negotiations and hold insurers accountable when they act in bad faith, ensuring my clients are properly compensated.
What Are Common Examples Of Bad Faith Insurance Practices In California?
Bad faith insurance practices in California often stem from insurance companies acting in ways that prioritize their financial interests over your well-being. Some common examples of how this often occurs include:
Denying Coverage Without Justification
Insurers may wrongfully deny you coverage by misinterpreting or selectively enforcing sections of their lengthy and unnecessarily complex insurance policies. They exploit the fact that you’re most likely not reading these documents.
Delaying Claims Processing
Some insurers deliberately delay investigating or processing claims, causing extended waiting times for policyholders who need funds for medical bills, vehicle repairs, or home damage. This tactic may force you to give up or settle for less than you should.
Offering Low Settlements
Insurers might offer an unfairly low settlement, betting that you will accept it without realizing you are entitled to more. They may present this as the final or best offer, leaving you to decide whether to fight for your rightful compensation or cave.
Failing To Communicate Clearly
Insurers sometimes provide vague or confusing information about coverage limits, what’s included, or claim statuses. This can make it difficult for you to know the full extent of your coverage or when you can expect your claim to be paid.
Misrepresenting Policy Terms
Some insurers may tell you that certain damages or incidents are excluded from coverage when they aren’t, preventing rightful payouts. This tactic relies on manipulating policy language to deny claims.
What Are My Rights If I’m The Victim Of Bad Faith Insurance?
If you suspect your insurance company is engaging in bad faith practices, you have legal rights and options, but they are worthless if you don’t know them. My goal here is to break them down and empower you with the knowledge you need to be made whole.
Obtain An Explanation Of Denial
The insurance company is required to provide a written explanation for any claim denial or decision. They cannot simply rely on verbal communication. You are entitled to a clear and detailed reason for their decision.
File A Complaint With The Insurance Commissioner
You have the right to file a complaint with the state’s insurance commissioner, who will investigate the issue. This can lead to pressure on the insurer to act fairly or face regulatory consequences.
File A Lawsuit For Bad Faith
If the insurance company continues to act in bad faith, you can file a lawsuit against them. In a bad faith lawsuit, you can seek the following:
- Compensation for the original damages you were claiming under the policy.
- Additional damages, such as emotional distress caused by the insurer’s bad faith actions.
- Attorney’s fees and potentially punitive damages if the court finds that the insurer acted with malice or egregious misconduct.
Claim Emotional Distress And Additional Damages
If the insurance company’s actions have led to significant inconvenience, such as leaving you without a home due to delays in processing a fire or flood claim, you may also seek compensation for emotional distress and other related damages.
How Can I Prove An Insurance Company Acted In Bad Faith?
To prove that an insurance company acted in bad faith, you would typically gather a range of documents and evidence that demonstrate the company’s failure to uphold its obligations. Here are the key types of evidence you’ll likely use in your case:
Insurance Policy
A thorough analysis of your policy’s terms and conditions is central to successfully moving forward with your case. The language of the policy will be compared with the insurance company’s actions to determine if they denied or underpaid a claim without justification.
Correspondence
All written communications between you and the insurance company, including letters, emails, and any formal claim denials, will serve as evidence. These documents help establish whether the insurance company provided clear reasons for its decisions or acted unreasonably.
Expert Testimony
In disputes over the value of a claim, such as a property damage claim, you can bring in experts. For instance, contractors or specialists can provide independent estimates to demonstrate that the insurance company’s assessment was incorrect or inadequate.
Claims File
If the case proceeds to litigation, you would be entitled to request the insurance company’s internal claims file. This includes communications between the claims adjuster and their supervisors or colleagues, which may show evidence of delays, misrepresentations, or improper handling of your claim.
Bad Faith Litigation Discovery
In a lawsuit, you can also seek evidence of how the insurance company handled similar claims. Patterns of underpayment or delays can demonstrate a broader strategy of bad faith practices.
These elements are fundamental to building a case you can use to show that your insurer acted in bad faith by either unfairly denying your claim, delaying payment, or undervaluing the amount owed.
What Are Common Defenses Insurance Companies Use In Bad Faith Cases?
In bad faith insurance cases, insurance companies often rely on several common defenses to justify their actions. Some of the most frequent defenses include:
Claiming Policy Language Is Clear
The insurance company may argue that the policy language is clear and their actions are in line with the terms and conditions. They might claim the denial of coverage or underpayment was based on a strict interpretation of the policy’s provisions, which are not open to misinterpretation.
You Caused Or Contributed To Your Loss
Insurers may assert that your actions caused or contributed to the loss or damage suffered, such as failing to maintain property properly or violating the terms of the policy. This shifts some or all the responsibility away from the insurance company.
Reasonable Dispute
The company may claim there was a legitimate dispute over the claim’s value, coverage, or liability. If the insurer can demonstrate that the denial or delay in payment was based on a reasonable or good faith belief, they might avoid bad faith liability.
Use Of Standard Procedures
Insurance companies may defend themselves by arguing that they followed industry-standard methods, such as using specific software or experts, to assess damages or claims. For example, they might claim their estimation process was reasonable, even if it resulted in lower compensation than you expected.
Lack Of Timely Notification
Insurers might argue that you failed to promptly notify them of the loss or claim, thereby violating policy requirements and giving the company a valid reason to deny or delay the claim.
Failure To Mitigate Damages
The insurer may contend that you did not take appropriate steps to prevent further damage or mitigate losses, which could impact the claim’s value or eligibility for coverage.
What Compensation Can I Receive In A Bad Faith Case?
In a bad faith case, you are entitled to the compensation that was originally owed to you under your insurance policy. For example, if your claim involved $100,000 in damages, you are entitled to receive that amount. Additionally, you may be entitled to interest on the delayed payment, attorney’s fees, and compensation for emotional distress and inconvenience.
In homeowner’s insurance cases, relocation costs can also be recovered if your home is uninhabitable due to the damage. Bad faith cases can be challenging to prove, but if successful, they can result in significant compensation due to the insurance company’s failure to act in good faith when handling your claim.
Still Have Questions? Ready To Get Started?
For more information on Insurance Bad Faith Claims In Glendora, California, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (626) 385-6303 today.
