Bad Faith Insurance Explained
Insurance providers have a duty of good faith and fair dealing to their policyholders. In plain English, this phrase means insurance companies have the duty to acknowledge customer claims in a prompt manner, to investigate the claim in a fair manner, and if money is owed on a claim, the insurance company must pay it without significant delay. If the insurance company breaches on these duties, it has acted in bad faith.
Digging Deeper Into Bad Faith
Bad faith is only applicable when filing a claim against one’s own insurance provider. For example, if the individual in question is dealing with the insurance provider for another person after an auto accident or another event, there can be no bad faith claim.
Consider a situation in which you are involved in a violent car accident caused by the negligence of another driver. You may make a claim against that other driver’s insurance, but the other driver’s insurance company does not owe you a duty of good faith and fair dealing. However, in this same scenario of a car wreck, if you opted to make a claim against your own insurance policy for the damage to your vehicle instead of going after the other person’s insurance, then your own insurance company would owe you a duty of good faith and fair dealing. Meaning, your insurance company must promptly acknowledge and investigate your claim and provide you with a prompt claims decision.
Why Bad Faith is Important
Bad faith insurance law is essential to our insurance system as it is one of the few ways to ensure insurance providers fulfill their duties. Sadly, many states (including Texas) are not adequately funding or providing the necessary enforcement tools to the governmental agencies charged with overseeing the insurance industry. Therefore, too often a wronged policyholder cannot turn to the government for help to correct bad decisions by insurance companies. Instead their only recourse is to pursue a bad faith claim against their insurer. If you are even slightly suspicious your insurance company has acted in bad faith, it is imperative you hire an attorney to ensure your claim is reviewed, paid or otherwise addressed in the proper manner.
Bad Faith Damages
A successful bad faith insurance claim can provide you, the policyholder with the policy benefits owed under the policy, a portion or all of the legal fees necessary to pursue the claim and sometimes even an additional amount beyond the policy’s specific benefits. If the bad faith case is particularly extreme, you might receive upwards of two to three times the policy benefit amount.
How to Proceed if Your Insurance Company Acts in Bad Faith
Plenty of insurance providers are more than willing to act in bad faith as it saves them money. Every claim an insurance company does have to pay out equals money it saves. The insurance company is banking on you doing nothing to fight back after they wrongfully deny or delay your claim. If you are even slightly suspicious your insurance provider has acted in bad faith, it is imperative you take action. Contact our legal team as soon as possible. We have experience litigating bad faith claims. Our attorneys will review the details of your case to determine if it qualifies as bad faith.
Does a Low Insurance Claim Offer Constitute Bad Faith?
This is a commonly asked question yet unfortunately there is no easy answer. Insurance providers might offer significantly less than what the customer believes he or she is owed. However, a low offer on a claim does not automatically mean the insurer is guilty of bad faith. As long as the insurance provider has a legitimate reason to make such a low offer, there likely is no bad faith. Yet if the insurer lacks such a reasonable basis, it might have acted in bad faith. You need to consult with an attorney experienced in handling bad faith claim to determine if your insurance company’s offer constitutes bad faith.
How Much is the Typical Bad Faith Insurance Claim Payout?
Each case is unique and determined by both the governing state’s bad faith laws as well as the specific facts of each claim. According to Texas Bad Faith law, once the policyholder or beneficiary of the policy proves bad faith, then they are owed the amount of the policy benefits, as well as the possibility of obtaining some or all of their attorneys’ fees, penalties and consequential damages. In some cases, there is even the potential for such damages and penalties to amount to double the money owed based on policy benefits.