Bad faith insurance is when an insurance company behaves in an unfair way, such as by denying claims without providing valid reasons for it or delaying payment. It can cause frustration and financial issues, which is why you want to know how to deal with the situation.
If you’re dealing with unpaid claims, there are important steps to take so that you receive your money. Read the rest of this article to explore:
- The types of bad faith insurance practices
- What to do if your claim is denied
- When to consult with a lawyer
- How to prove bad faith insurance
What are the Types of Bad Faith Insurance?
There are two types of bad faith insurance issues that can arise.
- First-party bad faith. This is when disputes occur between policyholders and insurance companies directly.
- Third-party bad faith. Your insurance company should defend you in situations where claims are made by another party, with an example being a car accident lawsuit.
Bad faith claims can be displayed in various ways.
- Unreasonable claim denials. The insurer doesn’t provide a valid reason for not approving your claim.
- Lack of claim investigation. Your insurer doesn’t take time or make an effort to investigate the claim before denying it.
- Delaying payment. This can be done on purpose to avoid payment. It includes tactics such as requesting more documentation without it being necessary.
- Underpaying claims. Your insurer might be paying much less than what the claim was worth.
- Policy term conflict. To avoid covering you, your insurer might misrepresent what is included in the insurance policy or deny the inclusion of specific terms.
What Should You Do When Dealing with Bad Faith Insurance?
If you’re dealing with an insurer who seems to be working in bad faith, there are important things to do to strengthen your case.
Keep a Record of Everything
You should document messages between you and the insurance company regarding the claim, your phone call logs, and denial letters that they sent you. These will show proof of the denial.
Ask for a Written Explanation
Requesting that your insurer sends you a written explanation for why they are denying the claim or delaying payment is sometimes all that’s required to get them to take the situation seriously. Keep a record of your request as this will show your effort to resolve the issue.
Review Your Insurance Policy
You should refer to your insurance policy for key terms and clauses regarding payment and claim processes. This will show you if the insurer is trying to avoid fulfilling their duties.
It’s worth getting the insurance policy reviewed by a lawyer on ContractsCounsel, an online legal network connecting vetted lawyers with clients for document review and drafting. They’ll be able to explain any confusing or vague terms, while helping you to build your case.
Contact a Lawyer
While you might be able to resolve the issue by contacting the insurance company yourself, following up with them, sending documents to prove the validity of the claim, and sending a request for a written explanation of why they haven’t approved the claim, unfortunately this might not be enough.
Hiring a lawyer can help you to deal with the issue. Here are times when it’s especially important to seek legal guidance.
- The insurance company refuses to investigate your claim, or their investigation hasn’t been thorough.
- They haven’t responded to your requests regarding the denied claim.
- They are taking their time to process or resolve the claim.
- They try to settle the claim with you, but they are offering a low settlement.
- They are violating the terms in the insurance policy.
- They refuse to provide reasons for your delayed or denied claim.
- They are suspected of being fraudulent or negligent.
A lawyer can help you with a bad faith insurance company in the following ways:
- They’ll review your insurance policy for you. Without a legal background, you might struggle to understand complex or vague terms. Your lawyer will also be able to gauge if the insurer is being vague in the policy on purpose, such as to deny claims.
- They’ll draft legal and accurate documents. If your efforts to contact your insurer and resolve the issue haven’t been successful, your lawyer will draft a demand letter to force them to respond.
- They’ll negotiate with the insurer on your behalf. With years of experience behind them, your lawyer will be able to reach a settlement with your insurer. They won’t accept a low offer that isn’t enough to cover the claim.
- They’ll help you gather evidence to support your claim, sorting through documents to choose the most appropriate ones.
- They’ll provide advice on whether or not your claim is valid and if it constitutes bad faith or not.
- They’ll use their legal knowledge to ensure you follow actions that comply with all state laws and regulations.
How Do You Prove Bad Faith in a Lawsuit?
It can be challenging to prove that your insurance company is acting in bad faith. Just because they have denied your claim, this doesn’t immediately point to bad faith.
An important difference is that the insurer should have a reasonable basis for denying claims. If not, then this is a sign of bad faith.
If your case goes to court, your lawyer will have to provide the following factors to help you win the case.
- Your claim was valid, as per what’s covered by your policy.
- The insurance company has denied or delayed the claim without a valid reason.
- The insurance company has disregarded your rights.
- The insurance policy is valid and hasn’t expired.
By focusing on these key factors, your lawyer will help you build a strong case against the insurance company.
Do you need a lawyer for a bad faith insurance claim?
You should contact an insurance lawyer on ContractsCounsel. All lawyers on the platform are professional, skilled, and have years of experience in assisting clients with getting their claims approved. They have also been vetted to ensure top-quality support and guidance.
