Five Most Common Bad Faith Insurance Practices
First party bad faith deals with claims made by policyholders and covers a wide range of transgressions. Here is an overview of the five most common.
The refusal of an insurance company to pay a claim without a reasonable basis, or failure of an insurer to properly investigate the claim in a timely manner, can constitute a case in first party bad faith. Third party bad faith claims are made when a policyholder has been sued and the policyholder's insurance company has failed to act reasonably to settle the claim, or has failed to properly and timely investigate or defend the claim.
Here are the five most common bad faith insurance practices:
An insurance company delays, discounts or denies a payment without reasonable basis: An insurer will simply deny payment for something that the insurer's policy clearly covers. This is the most common form of bad faith, and possibly the easiest to prove with the help of a bad faith insurance attorney.
Failure of an insurer to pay a covered claim as a result of failing to do a proper, prompt and thorough investigation as to reasonable liability and damages based upon all available information: When an insured party has provided the information necessary for their insurer to adequately respond to their claim and investigate the allegations, they have acted negligently.
An insurance company fails to affirm or deny a claim promptly, or within a reasonable amount of time upon receipt of a claim and/or proof of loss: Insurance companies are legally obligated to ensure timely communication to its policyholders, therefore when the insurer makes their customers wait weeks or even months to validate a claim request they are acting in bad faith.
An insurance company settles or attempts to settle a claim for far less than is deserved: We would all like to believe that our own insurance companies are on our side – they act like they are and they tell us that they are, yet unfortunately insurance companies are only out to make money for themselves. Many insurers are disreputable and notorious for attempting to dishonestly settle claims.
To extend the already lengthy process, some insurance companies will require an absurd amount of documentation from the claimant and/or physician: They will ask for submission of both a preliminary claim report and formal proof of loss forms, which generally contain the same information. They may also request paperwork that had never been mentioned in a policy and deny a claim if that paperwork is not produced.
There are numerous laws, statutes and levels of law enforcement against bad faith insurance. Bad faith insurers can be responsible for the following damages: statutory penalties, statutory interest, liability for judgements in excess of the policy limits, attorney fees, emotional distress, economic loss and punitive damages.
ABOUT THE AUTHOR: The Kristy Law Firm
The Kristy Law Firm specializes in helping policy holders hold their insurance companies responsible for their bad faith practices in Los Angeles, CA.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.