(US law) Forms of insurance have been in existence for thousands of years, but the current model of insurance companies really just evolved within the past few hundred years. Insurance helps protect people and their assets, but it’s important to remember that insurance companies are still businesses looking to turn a profit. It’d be a great world if we could always trust insurers to do the right thing, but unfortunately, some will act in “bad faith” when dealing with policy holders. This can become detrimental, so it’s imperative that every policyholder understand exactly what insurance bad faith is.
What is Bad Faith Insurance?
Insurance “bad faith” is a legal term that refers to insurers acting in unfair ways towards their policyholders. Bad faith can come in many forms, but it’s almost always an attempt by the insurance company to avoid making payments that a person is entitled to. Any insurance contract creates an implied covenant that the insurer will act fairly and in good faith when it comes to their policyholders. A few examples are considered especially egregious:
• Improper refusal to pay a settlement in a covered lawsuit
• Improper refusal to defend a policyholder in a lawsuit
• Failing to notify policyholder of all rights (i.e. not notifying of arbitration appeals process)
These violations may only apply to certain settlement cases since all insurance policies are different. In general, however, if something is promised in a policy but then not delivered, it is considered bad faith.
Bad Faith or Just Inconvenient?
Many people flat out hate dealing with insurance companies. In fact, there are few who don’t feel at least a little inconvenienced when going through this process. It’s important to note, however, that what may seem like an inconvenience may actually be an illegal act. When an insurance company acts in a way that is an obvious attempt to stop a person from getting the money that they deserve, it is likely an act of insurance bad faith. A recent example of an insurance company acting in bad faith is the Chartis workers compensation dispute, in which AIG/Chartis were wrongfully denied benefits and underpaid.
The best way to tell whether an act is bad faith or just inconvenient is to speak with an attorney. There’s no doubt that insurance procedures are going to be a hassle, but this doesn’t always mean that they’re illegal. An insurer who doesn’t take the time to investigate suspicious accidents (i.e. single car collision’s on the insured’s property) would potentially quickly go out of business after losing loads of money to individuals committing insurance fraud.
When a person feels as if their insurer is acting in a way that’s motivated by the urge to prevent a fair settlement, they can likely get more money than they were entitled to in the first place. A policyholder that has experienced bad faith insurance actually has the legal right to bring a tort case against the insurance company in addition to what they were fairly entitled to. Once again, an attorney is vital for this process to not only ensure that insurance bad faith occurred, but also to navigate the potentially complex insurance laws of a specific locality.
Unfortunately, we live in a world where many individuals, insurers included, are more worried about turning a profit than performing their moral and legal duties. Luckily, the law is set up in a way that creates penalties when insurance companies act in this manner. Insurers are meant to protect their policyholders, and this means that insured people shouldn’t be taken advantage of. Fortunately, with the right legal help, a person who has been treated in bad faith can recover damages for the stressful situation, and this goes a long way in helping prevent bad faith in the insurance industry.
Savannah Bobo is an English graduate and freelance writer/blogger who advocates consumer awareness. If you are dealing with a bad faith situation, like the Chartis workers compensation cases, you are fully entitled to contact a lawyer. Attorneys at the Doyle Raizner firm have experience disputing workers’ compensation denials and other bad faith practices.
Savannah