What Everyone Needs to Know about Bad Faith Insurance Claims
Insurance companies have a duty of care to act in a reasonable and prudent manner when settling claims. When they fail to do this, a bad faith insurance suit may sometimes be brought in a court of law in order to recover damages.
The exact duty an insurance company has toward a claimant will depend on whether that person is a “first party” or a “third party”. First party claims involve those made by actual policyholders, while third party claims deal with ones made against a policyholder. Some things that could be considered bad faith insurance claims against parties of the first part are:
- *Failing to investigate a claim
- *Refusal to pay within a reasonable timeframe
- *Offering substantially less in a settlement than what the actual loss is
- *Not offering a reasonable explanation for a denial
When the claim involves third parties, it normally involves a failure to defend a case or a failure to settle. Courts have determined that insurance companies have a duty to defend lawsuits, even when some of the damages involved are not covered by a policy. An example would be if a client were involved in an automobile accident and was at fault, in which case the insurance company would be obligated to pay the injured party for damages and/or defend a lawsuit if need be.
In cases where insurance companies refuse to pay, individuals may have no other choice but to seek relief in a court of law. Since plaintiffs in these cases must often bear their own attorney’s fees, courts sometimes award punitive damages to help compensate with this expense. If you have been the victim of a bad faith insurance claim, speak with an attorney to find out if relief is available.