Compared to the average policyholder - an everyday Bob or Joe - insurance companies are in a position of power. They have vast resources and superior bargaining positions. They also have a strong financial incentive to delay or deny claims. Put simply, the less they pay out in claims, the better their bottom line.
This puts the average Joes in a difficult position. You may find that your insurance company abandons you precisely when you need coverage the most.
Fortunately, the law helps level the playing field by holding insurance companies accountable. As a policyholder, you have rights. If you believe your insurance company has acted in bad faith to delay, deny or mishandle your claim, you may be entitled to compensation.
What are the elements of a bad faith claim?
In South Dakota, to demonstrate that your insurance company acted in bad faith, you must show three things:
- The insurance company didn't have a reasonable basis for delaying or denying your claim.
- The insurance company knew they didn't have reasonable grounds for their actions.
- You suffered financial losses as a result.
Essentially, the insurance company must have acted intentionally in taking advantage of you or "gaming" the system. For example, perhaps the insurance adjuster didn't bother to look at the evidence you submitted. Perhaps they outright ignored it, even though there wasn't any conflicting evidence. Or maybe the insurance company needlessly dragged out the investigation to discourage you from pursuing your rights.
What types of damages are available?
Depending on the circumstances, you may be entitled to:
- Compensation for the financial losses you've incurred as a result of your insurer's wrongdoing
- Damages for emotional distress connected to those losses
- Punitive damages above and beyond your economic losses (if the insurer acted with malice)
- Coverage of attorney fees
Of course, every case is different, and you should always consult with an attorney about the specifics of your situation. With the right approach, you may be able to recoup your losses - and then some.