Search our Article Directory:

Home | Finance | Insurance


What is Bad Faith Insurance?

By: Roberto Garabell

Bad Faith Insurance is essentially a legal term which involves disputes over insurance claims and payouts. In insurance contracts, insurance companies are expected to act with a level of good faith and in a fair manner with their clients. If a client feels that their claim was unfairly dismissed or that they were not paid out sufficiently, then this could be considered as bad faith on the part of the insurance company. The client then has the option to take legal action against the insurance company.

In terms of the law, this would be referred to as a tort claim. In some cases, clients can also make a contract claim. The difference between the two types of claims is that punitive and exemplary damages are available for tort claims but not for contract claims. Perhaps one of the most significant things about Bad Faith Insurance is that a claim may result in the client being awarded damages that are far greater than the original claim or policy limit if the insurance company is found to have acted in bad faith.

Defining bad Faith in the Context of Insurance

An insurance company is obligated in its duties to insure its clients according to the policies that the clients have contracted. In general, these duties can be categorized into first-party claims and third-party claims, and the insurance company's obligations vary accordingly.

A typical first-party claim will relate to personal property such as a house or car. In that case, the insurance company has a duty to properly investigate the damage and cover the cost of repairs or replacement within the value of the policy. An act of bad faith would be if the insurance company refused to acknowledge the claim in the first place. Alternatively, they may not carry out a proper investigation or they may undervalue the cost of the damage.

A third-party case of bad faith is somewhat more complicated. For third-party claims, the insurance company has two obligations. First, they have to defend a claim or lawsuit regardless of whether it is covered by the policy. Secondly, the insurer has a duty to pay any judgment against the policy holder up to the limit of coverage, if the judgment is for an act or omission that is covered under the policy. This is known as indemnification and insurance companies tend to exercise a great deal of control over this type of litigation. Bad faith may occur if the insurance company refuses to make a defense in a lawsuit or claim, or if they refuse to pay a judgment issued against the policy holder.

How bad Faith Insurance Protects the Policy Holder

The ability of a policy holder to sue an insurance company on the basis of bad faith holds insurance companies accountable to properly investigate, defend, and pay out claims. In some states, statutes allow for punitive damages to be used as a mechanism for discouraging bad faith on the part of insurance companies.

Bad faith is generally interpreted as case law. Typical cases would include claims such as inadequate or improper investigation of a claim, an undue delay in processing a particular claim, issuing threats against an insured party, refusal to defend a lawsuit or claim, making unreasonable interpretations of an insurance policy in order to avoid paying out a claim, or refusal to make a reasonable settlement payment.

The Process of bad Faith Insurance

A claim on Bad Faith Insurance relies on litigation and can therefore be an extremely lengthy process. Some cases have taken as long as 22 years before being resolved. In general though, Bad Faith Insurance claims tend to result in extremely large punitive damages. One particular case awarded $145 million in punitive damages.

How do you go About Claiming on Bad Faith Insurance?

Before you start out on the path of litigation, understand to the best of your ability all the terms and conditions of your policy. Also, realize that it is a lengthy process and if the judgment does not rule in your favor, you will have large legal bills to settle. Know all the facts of your case and be able to clearly articulate why you believe the insurance company acted in bad faith. You should then approach a lawyer who specializes in Bad Faith Insurance. They will be familiar with the process and should be able to tell you early on if they think you have a case worth pursuing.

Article Source: http://www.articlekingpro.com

At the Law Offices of Mickey Fine Law Firm in Manhattan Beach, California, we are los angeles personal injury attorney that help clients who have been seriously injured due to the negligence of another party, and clients who have lost a family member in a tragic accident. We also help people whose insurance companies are denying or delaying payment of a legitimate claim.

Please Rate this Article

 

Not yet Rated

Click the XML Icon Above to Receive Insurance Articles Via RSS!
Additional Articles From - Home | Finance | Insurance
Sign Up for a free Article King Pro account or learn more.
Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds
About Us
Link to Us
Contact Us
Copyright & DMCA
Privacy Policy
Terms of Service


Most Recent Articles

Powered by Article Dashboard