What Constitutes Insurance Bad Faith?
Although insurance gives the feeling of protection to the insured, unfortunately in some instances receiving the benefits of an insurance policy can be quite a struggle. At times, an insurers failure to live up to a policys terms will lead to a bad faith claim against it, and if proven, the insured will receive substantially more than originally claimed. State statutes regulate the elements of a bad faith insurance claim and the damages assessed when one is proven.
Common Examples of an Insurers Bad Faith
Bad faith covers a range of possible occurrences, it is best to explain bad faith by giving an example of it. If you have an automobile insurance policy and are involved in a traffic accident that was the other drivers fault, you will report that to your insurer and will make a claim under your policy. Your claim will consist of the costs that you have incurred because of the accident, such as the repair cost to your vehicle and any medical costs for injuries you suffered from the accident. If your insurer fails to investigate your claim within a reasonable time, typically 60 days from receiving it, they may be acting in bad faith. If, on the other hand, the insurer performs an investigation but denies the claim for a reason not covered by the policy, it has acted in bad faith.
In the same instance, if the driver of the other car files a lawsuit against you, your insurer is obligated to defend you and its failure to do so is another example of bad faith.
Where it is clear that you are entitled to damages under the policy, an insurers failure to pay your claim within a reasonable time is also considered bad faith. However, it is useful to note that because some claims are for extremely large amounts, such as when your house is destroyed due to arson, it is common for insurers to admit liability but try and settle for a sum less than one may be seeking. In the event that a settlement is reached, but the insurer fails to abide by its terms, for instance not making timely payments or refusing to pay at all, can be seen as acting in bad faith.
Common Examples of an Insurers Bad Faith
Bad faith covers a range of possible occurrences, it is best to explain bad faith by giving an example of it. If you have an automobile insurance policy and are involved in a traffic accident that was the other drivers fault, you will report that to your insurer and will make a claim under your policy. Your claim will consist of the costs that you have incurred because of the accident, such as the repair cost to your vehicle and any medical costs for injuries you suffered from the accident. If your insurer fails to investigate your claim within a reasonable time, typically 60 days from receiving it, they may be acting in bad faith. If, on the other hand, the insurer performs an investigation but denies the claim for a reason not covered by the policy, it has acted in bad faith.
In the same instance, if the driver of the other car files a lawsuit against you, your insurer is obligated to defend you and its failure to do so is another example of bad faith.
Where it is clear that you are entitled to damages under the policy, an insurers failure to pay your claim within a reasonable time is also considered bad faith. However, it is useful to note that because some claims are for extremely large amounts, such as when your house is destroyed due to arson, it is common for insurers to admit liability but try and settle for a sum less than one may be seeking. In the event that a settlement is reached, but the insurer fails to abide by its terms, for instance not making timely payments or refusing to pay at all, can be seen as acting in bad faith.
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