Understanding 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.
Unfortunately, insurance bad faith is something that happens often. 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. That means the individual or entity can either accept the decision by the insurer or take 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.
In every insurance contract, there is a “covenant of good faith and fair dealing,” which is either expressly stated or implied. That means both parties have their respective obligations to follow what is stated in the contract.
This contract provides that the insurance firm should fully compensate the insured party in timely fashion under appropriate circumstances; otherwise, the company is considered to be in violation of the covenant of good faith and fair dealing. In some states, there are statutes or other regulations that govern bad faith by insurance firms.
When bad faith is exhibited by these companies, they may be subject to punitive damages, government penalties and statutory damage. Because there are different bad faith-related laws in different states, it is important for anyone with these issues to consult with a lawyer.
Insurance companies pay different bad faith damages, depending on the jurisdiction. Generally, the damages will be equivalent to the compensatory damages an insured party would have received from the insurer a non-bad faith setting. A lot of states also allow for punitive damages, or damages intended to punish the insurance company for bad conduct. In some states, there are limits to how much may be claimed in punitive damages; in others, there are none. 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 attorney will not be paid from the client’s award of damages, but rather from the damages that the insurer will have to pay the lawyer in a separate judgement.
If you think your insurance provider has acted in bad faith on your policy claim, see an insurance lawyer who can outline the possible steps you can take against the company.
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