Bad Faith Insurance Explained

Bad faith insurance does not reflect a type of policy. Instead, bad faith insurance represents an insurance company’s attempt not to honor its legally binding obligations, such as refusing to pay out for a valid claim or not processing a claim within a reasonable amount of time. Insurers act in bad faith whenever they do not follow the language written in a policy. Acting in bad faith includes not revealing information that a policyholder has the legal right to know. Bad faith insurance also covers the unreasonable demands placed on policyholders by insurance companies.

At Morgan and Morgan, we address two broad categories of bad faith insurance cases. The first type of case is called first-party bad faith insurance, which is an act of bad faith insurance committed by your insurer against you. Third-party bad faith insurance adds a third party to a case, such as an auto repair shop that overcharges for the work done on a damaged vehicle. Another example of third-party bad faith insurance occurs when a retailer sells a defective product that is the fault of the manufacturer.

Knowing how your insurer can interact with you unethically can not only help you fight back but also prevent any scams implemented by the insurance company. To save money, an unethical insurance company has several ways to commit acts of bad faith.

Deny a Valid Claim

One of the most common ways an insurance company acts in bad faith concerns denying a valid claim. You can fight back against an unjustified denied claim by submitting additional physical evidence, as well as providing the insurance company with the contact information of witnesses. If your insurance company denies your claim for invalid reasons or does provide any reason at all, one of the highly-rated insurance attorneys from Morgan and Morgan helps you file a bad faith claim against the insurance company.

Undervalue a Claim

Also referred to as a lowball claim, an undervalued claim involves an insurance company approving your claim, but for less money than you deserve. One of the responsibilities of the attorney that you hire from Morgan and Morgan is to calculate a reasonable value for compensation. This involves submitting every receipt associated with medical bills and property damage, as well as calculating a value for non-economic damages such as pain and suffering. An experienced insurance lawyer at Morgan and Morgan files an appeal to recover the full value of your financial losses.

Unreasonable Requests

Bad faith insurance includes an insurer placing unreasonable pressure on a policyholder to do something the policyholder does not have to do. A prime example of an unreasonable request concerns an insurance company demanding a policyholder undergo a second medical examination when the first medical examination produced legitimate results. An insurance company cannot demand your attorney hand over certain documents, as well as insist you follow deadlines that you do not have to follow.

Arbitrarily Increasing the Premium

Many insurance companies explore all angles when it comes to making money. In addition to denying valid claims to save a considerable amount of money, insurance companies also arbitrarily increase premiums. The most common instances of an arbitrary premium increase regard car and health insurance. An insurance company might increase your monthly car premium payments even though you have not gotten involved in a car accident over the previous 12 months. If you pay for your health insurance, the insurance company might increase your premiums although you have not required medical care over the past 12 months.

Claim Delay

One of the old tricks in the bad faith insurance book is to delay processing a claim. Legitimate delays happen for a couple of reasons, which include a backlog of claims in the processing system and questions concerning the evidence submitted with a claim. However, far too many insurers intentionally delay the processing of valid insurance claims, especially for cases that involve a policyholder filing a claim without legal representation. By working with one of the highly-regarded insurance attorneys at Morgan and Morgan, you should expect your claim to be processed in a timely manner.

To avoid becoming a victim of one or more acts of bad faith insurance, you should gain insight into the legal obligations your insurer must meet.

Conduct a Thorough Investigation

The insurance adjuster reviewing your case might claim the company conducted a thorough investigation when the truth is the insurance adjuster did nothing more than place your file in the end-of-investigation pile of paperwork. Insurance companies are legally responsible for conducting thorough investigations that include reviewing photographs, reading an incident report, and interviewing every reliable witness.

Present a Fair Settlement Offer

Insurance companies love it when a policyholder fights back against bad faith actions without the legal support of an insurance attorney. If you do not hire an experienced lawyer, the insurance company might be tempted to commit one or more acts of bad faith, such as refusing to negotiate a settlement. If your attorney submits an offer to settle your claim, the insurance company is legally obligated to respond in some manner. Any counteroffer submitted by the insurance company must include a reasonable settlement value.

Provide a Reason for Denying a Claim

You have the right to know why an insurance company denied your claim. An unethical insurance adjuster might try to take advantage of a policyholder’s lack of knowledge by sending a denial letter that has nothing more than a terse sentence stating the claim is denied. You deserve a comprehensive explanation as to why the insurance company denied your claim. Working with an insurance attorney from Morgan and Morgan ensures you receive a detailed explanation.

The most effective strategy to prevent falling victim to one or more acts of bad faith insurance is to work with an experienced insurance attorney. Your lawyer provides several types of legal support.

Gathers and Organizes Evidence

Your insurance attorney conducts an extensive investigation into your case before helping you file a persuasive insurance claim. The investigation focuses on collecting evidence, such as photographs and video images captured by a security camera. Witness accounts of an incident can verify your version of events. For a bad faith health insurance case, your lawyer requests copies of your medical records that include the results of diagnostic tests and a description of your treatment regimen.

Interacts With the Insurance Adjuster

Dealing with an insurance company can be a highly frustrating experience. From not getting phone messages returned to trying to understand the complex legal jargon, you can spend way too much time interacting with an insurance adjuster. One of the most important roles of an insurance attorney is to act as an intermediary between you and the insurance adjuster. Your attorney ensures your claim receives a fair review, as well as monitors your claim as it moves through the review process.

Calculate a Fair Value for Compensation

One of the keys to getting an insurance claim approved is to submit a fair value for compensation. Experienced insurance adjusters can detect an invalid claim soon after receiving the claim. Hiring one of the accomplished insurance lawyers at Morgan and Morgan helps you calculate a fair value for compensation. Although calculating a reasonable value for economic damages is easy to do, the same cannot be said for calculating a fair value for pain and suffering. Your attorney calculates a fair value for pain and suffering by using a formula that factors in the value of economic damages like medical bills and property damage.

Because you take care of your financial obligations by sending in monthly premiums to an insurance company, you should expect the insurer to deal with you in good faith. Unfortunately, some insurance companies operate by implementing unethical practices. 

To fight back against bad faith insurance, schedule a free, no-obligation case evaluation today with Morgan and Morgan.