When you purchase an insurance policy, you expect it to be there when you need it. Your policy is a contract. You agree to pay the determined amount for coverage, and if you meet the conditions as outlined by the policy, the insurer will pay you.
However, some insurers do not want to hold up their end of the contract, usually for cost reasons. Most people never need to make a claim on their insurance policies, meaning the carrier collects payments for years without ever losing money. When someone makes a claim on their policy, though, that represents a loss to the bottom line, and therefore insurers may be reluctant to pay the claim as a means of protecting their profit margin.
Sometimes, insurance companies are able to deny claims legitimately. Insurance fraud is a serious issue, and costs carriers millions of dollars every year. In many cases, though, insurers deny legitimate claims without cause to avoid paying out. In these cases, the insurance carrier is acting in bad faith — and there are a number of ways they can do this.
Denying Legitimate Claims Without Cause
It may sound like something out of a John Grisham novel, but some insurance companies deny even legitimate claims as a matter of course. The reasons vary — the insurance company might believe the insured will not continue to pursue the claim after denial, they might not have all of the facts — but denying a legitimate claim without cause is often grounds for a lawsuit; in fact, some of the most successful class action cases have been launched by those who have experienced bad faith denial of claims.
Failing to Properly Investigate Claims
An insurance company has a duty to conduct a thorough examination of all claims in order to make a fair determination. They act in bad faith when they fail to consider all of the facts or disregard proof in a claim or make assumptions without having all of the information.
When you make a claim on an insurance policy, you usually expect it will be reviewed and paid quickly. Sometimes, though, insurance companies delay paying the claim on purpose. If the claim is not paid for weeks or months without any reasonable explanation, the company may be acting in bad faith.
Requiring Excess Documentation
When you make an insurance claim, you will have to provide documentation to support your claim. If the insurance company continues to delay payment by asking for additional documentation, including new copies of documents you have already submitted or unrelated information, they could be acting in bad faith.
Offering Lowball Payments
Insurance companies are in business to make money, and paying claims affects profit margins. Some companies attempt to contain costs by offering claim settlements much lower than they should be. Such offers, in some cases, have been ruled bad faith.
Threatening Cancellation or Rate Increases
Anyone who has made a claim on a homeowner’s or auto insurance policy understands making a claim usually means an increase in rates. However, when an insurance company threatens cancellation or major rate increases as a means to deter a claim or convince someone to settle for a lesser amount than they are due, that is acting in bad faith.
Misrepresentation of Coverage
If a representative of your insurance carrier deliberately lies about the coverage or fails to disclose important information about a policy that is a clear cut example of bad faith.
Lack of Adequate Appeals Process
If the insurance company denies a claim or makes an inadequate offer, you are legally entitled to appeal the determination. However, some carriers give claimants limited options, which usually include either accepting the settlement or going through arbitration. If there is no means for a policy holder to successfully appeal a claim, the insurance company could be acting in bad faith and further legal action may be necessary.
What You Can Do About It
When you file a claim with your insurance company and it is denied due to bad faith, it is normal to become frustrated. Your best course of action is to contact an attorney who is experienced in bad faith cases, who can walk you through the process of filing a suit and help you get the benefits you paid for and you are entitled to receive. In some cases, just the act of taking legal action will compel the insurance company to reevaluate the claim and hold up its end of the contract — and help you get back to your life.
About the Author: New York–based attorney Richard Quadrino has helped hundreds of individuals get the compensation they deserve from insurance companies.