Insurance bad faith occurs when an insurance company fails to comply with its duties to policyholders.
Insurance companies have a responsibility to fulfill its obligations to their policyholders. These duties are stated in the insurance contract along with the responsibility to maintain fair dealing and good faith.
It includes immediate consideration for any claims filed by the insured. The insurer is also required to conduct complete and legal investigation on the claim. It is prohibited from making any unreasonable denial to the claim. It is mandated by law to pay the full amount of benefits as stated and agreed in the insurance policy.
Insurance Bad faith acts can happen in automobile, homeowner, health, boat and recreational, and life insurance.
Insurance bad faith act examples
1. Refusal to investigate a valid insurance claim
2. Intentional delay of payment
3. Rejecting a claim when liability is foreseen as strong
4. Refusal to defend an insured from third-party claim
5. Prioritizing the insurance company's own financial interest over the insured
6. Paying less than the just amount covered in terms and agreement
7. Misrepresenting any of the terms in the insurance policy
The insurance company is also prohibited from denying benefits to the claimant based on past claim history. It is expected that screening and evaluation has been done before the approval of policy. Any level and cost of protection that the insurer had decided to give to the insured should not be altered in any way.
If the insurance company is proven guilty of a bad faith act, the court will require it to:
1. Compensate the full amount according to the stated and agreed terms in the policy
2. Pay the expenses of the insured in hiring an attorney
3. Pay for emotional loss
4. Compensate punitive damages if there was a proven intentional or malicious act
However, the insurance company may act in defense because of the following reasons:
1. The insured had written misleading or untruthful information in the policy
2. The insured had signed a waiver, releasing the insurer from any bad faith conduct liability.
However, you may review your insurance policy and assert some violation on the terms and agreement. If you are an employee and with a group insurance policy; you are protected from bad faith under the ERISA (Employee Retirement Income Security Act of 1974) federal law.
Some regulations of ERISA do not apply to policies of insurance companies, and you may file for bad faith litigation. If all documents and evidence prove that the insurer committed such wrongful act; you will be able to recover damages.
In filing for an Insurance Bad Faith claim, you need to preserve all communication from your insurance company. Seek a professional lawyer to help you gather enough evidence to support your claim. An Insurance bad faith attorney in Los Angeles will help you recover the full amount that you deserve.