What Research About Services Can Teach You

What Is Insurance Bad Faith?

Insurance bad faith, which also goes by the term, insurance fraud, refers to the mistreatment of consumers and businesses by their insurance carriers. It is normally used in situations in which an insured person or entity is refused a settlement payout.

Insurance bad faith is unfortunately a widespread occurrence. Plenty of insurance companies depend on statistics when determining how much must be paid out, depending on the given circumstances. Even if an insured person is entitled to a certain amount of cash, the insurer may still not want to pay it in full. Either the individual or entity accepts the insurer’s decision or brings the matter to court for bad faith.

Below are the three common scenarios involving insurance bad faith:

> insurer denying all promised benefits to the insured;

> insurer offering a compensation amount lower than the policy guarantees; and

> unwarranted payment delays.

Every insurance contract comes with a “covenant of good faith and fair dealing,” which may be implied or directly stated. That means both parties have their respective obligations to follow what is stated in the contract.

In such a contract, the insurance company must fully compensate the insured party when appropriate and in a timely manner; otherwise, the insurer will have committed a violation of the good faith and fair dealing covenant. There are states that have statutes or other regulations that cover bad faith by insurance providers.

When these companies exhibit bad faith, they can be subject to statutory damage, punitive damages and penalties imposed by the government. Because there are different bad faith-related laws in different states, it is important for anyone with these issues to consult with a lawyer.

The bad faith damages paid by insurance companies are different, depending on the jurisdiction. The damages will be generally equivalent the actual compensatory damages the insurer, in a non-bad faith setting, would have paid out to the insured. A lot of states also allow for punitive damages, or damages intended to punish the insurance company for bad conduct. Some states put a limit on the amount of punitive damages that may be claimed, while in others, the sky is the limit. Because insurance fraud or bad faith can be a complicated and often confusing matter, anyone considering to go to court due to such experience must seek assistance from 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.

Cite: click reference