A Simple Plan For Researching Insurance

Insurance Bad Faith – What Is It Exactly?

Insurance bad faith, also called insurance fraud, is a term that refers to the mistreatment consumers and businesses get from their insurance companies. It is normally used in situations in which an insured person or entity is refused a settlement payout.

Insurance bad faith unfortunately occurs ever so often. Plenty of insurance companies depend on statistics when determining how much must be paid out, depending on the given circumstances. Even with the insured person being fully entitled to a certain amount, the insurer may not pay that money in full. That means the individual or entity can either accept the decision by the insurer or take the matter to court for bad faith.

The following are the three most common insurance bad faith scenarios:

> insurer denying all promised benefits to the insured;

> insurer offering less compensation than what the policy guarantees; and

> unreasonable delays in payment to insured party.

Every insurance contract comes with a “covenant of good faith and fair dealing,” which may be implied or directly stated. That means the two parties – insurer and insured – are both obliged to follow what is in the contract.

This contract dictates that the insurance company compensate the insured party fully and in timely fashion when it is appropriate, where failure to do so is tantamount to violating the good faith and fair dealing covenant. In some states, there are statutes or other regulations that govern bad faith by insurance firms.

When bad faith is exhibited by these companies, they may be subject to punitive damages, government penalties and statutory damage. Bad faith claims are affected by different laws in different states, so anyone dealing with related issues with their insurers must talk to a lawyer.

The bad faith damages paid by insurance companies are different, 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. In several states, punitive damages, or damages meant to punish an insurer for bad conduct, also apply. In some states, there are limits to how much may be claimed in punitive damages; in others, there are none. Since insurance bad faith or fraud can be complex and confusing, anyone planning to go to court because of such experience should always consult with a lawyer.

This type of case is usually accepted by an attorney on a contingency basis. That means the client will not be paying the attorney from the damages awarded to him, but rather from the damages that the court will specifically order paid to the attorney in a separate judgment.

If you believe your insurance company has acted in bad faith on your policy claim, talk to an insurance lawyer who can outline the steps you can take.

Source: Shernoff Bidart Echeverria Bentley