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Insurance companies are the real MASTER MIND in claim settlement. They are rich in resources in every aspect from financial strength to negotiation capabilities whereas policy holders are their weak opponents. With that disparity recognized, most courts always look for an obligation of good faith and square dealing in every insurance product.
Insurance companies failing to act reasonably in claim processing is quite common. Absence of investigation and/or reluctance to pay the claimant what he/she demands and deserves is at the root of an unfavorable outcome for the policy holder. Anyone, who has gone through such unfortunate experiences, is entitled to lawsuit filing. State laws clearly define and describe the ‘Bad Faith’ context. A claim may proceed according to the established common law as standardized by the court or the violation of a state statue might be a solid ground for such a claim. In the next section, we will take a detailed look of the constituting elements of bad faith.
Common Law Bad Faith – Understand Its Components
When it comes to bad faith, there are no homogeneous elements across the country. In some states, bad faith is defined as an unreasonable conduct or a bad conduct without any proper reason. Other states present a narrower view. It’s not fairly debatable to find liability in cases where claims are denied. The insurance companies are well aware of the situation. Adding to the complications is some states’ perspective of considering the claim as a breach of contract whereas in the rests, it’s a tort.
Under a common law torts definition, an insurance company owes its customers i.e. the policyholders a duty of fair dealing and good faith on strength of the special bond between the parties. In order to prove bad faith under a common law, the policyholders need to establish two important points:
Benefits due as mentioned in the policy were withheld: The point requires you to prove that under the terms of your insurance policy, you had a valid claim. The onus is upon you to prove that the insurance company rejected your claim. In some states, you are required to put forward a final demand before resorting to lawsuit filing.
No apparent reason why benefits under the policy were withheld: Whether or not the insurer’s role in the entire matter was reasonable enough undergoes objective assessment in the light of the facts and situations as they were at the time when the decision was made. Mere negligence, in some states, doesn’t amount to bad faith.
Certain actions have been recognized as bad conducts by the court. Any of the following factors can establish your case of bad faith though is not considered a conclusive evidence of the case:
- Misrepresenting relevant insurance policy provisions or facts
- Failing in claim acknowledgment and taking prompt actions after obtaining a claim request
- Failing to approve and implement established reasonable standards to investigate and process the claims
- Failing in either approval or denial of claims within a reasonable time limit after the policy holder submitted a proof of loss
- Failing to offer reasonable explanations for claim refusal.
Getting help from McCormick & Murphy, P. C. should not be considered as the last recourse of action. Involving an expert into the matter immediately after you sense bad faith will save a lot of hassle and time on your part.
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