10 Tactics Insurance Companies Use That Result in Bad Faith Insurance Claims
Is your insurance company looking out for you? Most people would like to believe they are, but in many instances, that’s not the case. An insurance company that puts their own best interests ahead of yours may be acting in bad faith.
It’s important to understand the insurance company’s responsibility to you as a policyholder, as well as when they’re failing to meet this responsibility. Keep reading to learn more about bad faith insurance and whether your insurance company is acting in bad faith.
What Is Bad Faith Insurance?
Bad faith insurance refers to the unlawful and unethical practices conducted by an insurance company when handling claims made by policyholders. It occurs when an insurer intentionally and unjustifiably denies, delays, or undervalues a valid claim made by an insured individual. Bad faith insurance generally involves a breach of the insurer’s duty to act in good faith and deal fairly with their policyholders.
An example of this is when an injured party files a claim against an at-fault driver’s insurance policy, but that insurance company refuses to pay the claim and even rejects multiple settlement offers during the subsequent litigation. A Florida jury found Geico had acted in bad faith and is now responsible for a $2.9 million judgment.
10 Bad Faith Practices That Insurance Companies Employ
1. Unreasonable Denial of Claims
Insurance companies may deny a claim without a valid reason to do so. They may claim a false reason, misrepresent a portion of the policy, refuse to acknowledge listed coverage in the policy, or fail to give a reason at all. This would constitute an act of bad faith.
2. Failure to Investigate Claims Adequately
Insurers have a duty to conduct a prompt and thorough investigation into claims. However, bad faith occurs when they intentionally perform a hasty or incomplete investigation, ignoring relevant evidence or witness statements.
3. Delaying Claim Processing
Insurers may intentionally delay the processing of claims, making the policyholder wait for an unreasonably long time to receive the benefits they are entitled to. This delay can cause financial hardship and additional stress for the policyholder.
4. Lowball Settlement Offers
When an insurance company undervalues a claim and offers a settlement that is significantly lower than what is reasonable, it can be considered bad faith. This tactic is often used to pressure policyholders into accepting less than what they are entitled to.
5. Misrepresentation or Concealment of Policy Provisions
The insurance company may intentionally misrepresent the meaning behind a certain portion of your policy and use this as a basis to deny your claim. If the language of your policy can reasonably be interpreted in a way that would cover your current claim but your insurance company refuses to acknowledge this, they may be acting in bad faith.
6. Improper Cancellation of Policies
An improper cancellation of policies occurs when an insurer cancels a policy without a valid reason or fails to follow proper procedures and regulations for policy cancellation. This commonly takes the form of retaliatory cancellation in which an insurer terminates a policy in response to the policyholder exercising their rights, such as filing a claim or questioning an insurer’s practices. It’s often employed when policyholders experience significant losses and is designed to help the insurance company avoid potential payouts.
7. Threatening Statements
Your insurance company should never employ threatening statements, intimidation, or coercion against you. Examples may include threatening to drop you as a policyholder if you don’t accept their settlement or threatening to take legal action against you if you choose to submit a claim. Such actions are acts of bad faith insurance, and you should contact an attorney immediately if they’re being employed against you.
8. Failure to Communicate Effectively
An insurer is obligated to keep in communication with the policyholder about the status of their claim. They must promptly respond to policyholders when a claim is made under their policy. Leaving policyholders in the dark about the status of their claim via a lack of calls, emails, or other forms of communication may be an act of bad faith.
Furthermore, if an insurer denies a claim, they have an obligation to provide a clear and valid explanation for the denial. Bad faith occurs when the explanation is vague, contradictory, or lacks a reasonable basis.
9. Retaliatory Actions Against Policyholders
In some cases, you may experience retaliation after submitting a claim or raising concerns with your insurance company. Examples include raising your premiums, refusing to renew your policy, claim denials, and harassment. These are examples of bad faith insurance, and you should not be subject to them.
10. Blaming Damage on Wear and Tear or Lack of Maintenance
Insurance companies may try to claim that the damage to your property was due to normal wear and tear or that it was caused by you not maintaining the property properly. If you have evidence to the contrary and your insurance company refuses to take it into consideration, they are acting in bad faith.
Seeking Legal Assistance
Bad faith insurance suits can be very complex. If you believe that you’ve been the victim of bad faith tactics, it’s important to find an attorney who has experience litigating these types of claims.
Our attorneys at Dunnion Law have successful case studies, positive reviews, and verifiable experience. We are compassionate with your situation but tough on insurance companies. If you’re in California, contact our team for assistance with your bad faith insurance claim.