Insurance Bad Faith

People and busiensses purchase insurance to protect themselves from economic losses that arise from personal injury, property damage or lawsuits that result in those losses. Policyholders pay premiums for insurance. Insurance Companies owe duties to each policyholder.

Those duties include but are not limited to: 

  • Duty to provide coverage
  • Duty to investigate claims and uphold the terms of the policy
  • Duty to promptly and fully pay any valid claims covered by the policy
  • Implied Duty of good faith and fair dealing in adjusting the claim 

Insurance Companies regularly fail to uphold such duties. Although Insurance Companies owe such duties, they fail to account for their implicit bias to protect and guard their profits. Insurance Companies often engage in deceptive practices, misinterpret policy language in order to avoid paying claims.  More often than not they improperly delay resolution of claims, make arbitrary demands regarding proof of loss, use abusive tactics, fail to conduct a thorough investigation and ask insureds to contribute to settlements when they should not have to. Such actions breach the implied duty of good faith and fair dealing, and may provide grounds for a potential bad faith lawsuit. 


Bad Faith Lawsuits

Breach of implied covenant of good faith and fair dealing is a common-law tort claim. Some states have enacted statutes to prohibit bad faith or to prohibit certain types of actions that are considered bad faith. California addresses insurance bad faith through the Unfair Claims Practice Act and common law. A policy holder can bring a statutory and common law claim. An insurer who is found to have acted in bad faith can be liable for damages in excess of the policy limits, including liability for judgments in excess of policy limits, statutory penalties, interest, emotional distress, consequential economic losses, attorneys’ fees and punitive damages.

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What Are Some Types of Insurance Bad Faith?

While there are many types of insurance bad faith, the most common types include:

  • Insurance companies that harass and intimidate you while investigating a claim
  • Insurance companies that delay or deny compensation for your claim without justification
  • Insurance companies that make the claim process as burdensome as possible as a means of discouraging you from making a claim
  • Insurance companies that ignore your claim, or fail to reply to your claim in a timely manner
  • Insurance companies that provide no explanation to you for a denied claim or a claim that is significantly underpaid
  • Insurance companies that do not thoroughly investigate your claim
  • Insurance companies that deliberately fail to tell you about the appeals process
  • Insurance companies that deliberately misrepresent the policy limits of your insurance policy
  • Insurance companies that refuse to initiate settlement discussions with you or your attorney
  • Insurance companies that fail to protect you from excess liability

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