If you or a loved one is injured in an accident you may be entitled to compensation which usually means dealing with an insurance company. Although insurers have an advantage because they have teams of attorneys and experts, the law requires insurance companies to treat claimants and policyholders fairly. While there may be legitimate reasons to deny a claim, an insurer that fails to engage in good faith and fair dealing may be held liable for bad faith.
What is bad faith?
Bad faith is a legal term for an insurer denying a claim without a reasonable basis. In first party insurance situations, bad faith arises when an insurance company denies a claim without a valid reason. In third party insurance situations, bad faith occurs when an insurer fails to defend or indemnify the policyholder without a valid reason.
Proving bad faith varies from state to state. In some states, it is necessary to show that the insurer failed to conduct a thorough investigation. Other states have a higher a higher threshold that requires proving the insurance company missed or ignored obvious facts or information in denying a claim. A stricter standard that some states rely on requires demonstrating an insurer intentionally conducted an inadequate investigation.
Generally, it is not necessary to demonstrate that the insurer denied a claim merely to advance its interest at the expense of the claimant. On the other hand, an insurance company that makes a mistake or error in denying a claim cannot be held liable for bad faith. Lastly, an insurer that is shown to follow a pattern or practice of not adhering to state regulations governing claims investigation can be held liable for bad faith.
What can I do if I have been the victim of bad faith?
If you have been the victim of bad faith on the part of an insurance company you have options. By engaging the services of an experienced insurance law attorney, you may be able to recover damages from the insurance company. These damages include the amount the insurance company should have paid out for the initial claim, as well as additional damages arising from the bad faith denial.