Attorney David J. King

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3 examples of bad faith insurance practices

On Behalf of | Jul 17, 2024 | Insurance Bad Faith

The law requires liability insurance before people are permitted to drive in most states. Most mortgage companies require that people carry homeowners insurance on finance properties. Businesses of various sizes and functions may carry a broad assortment of different types of insurance.

Those making a claim against an insurance policy generally expect support and cooperation, not a bitter battle. Unfortunately, some people have a difficult time ahead when they turn to insurance providers for financial support after suffering an injury or significant property damage. In some cases, the conduct of an insurance company may cross the line and break the law.

What conduct may constitute bad faith insurance practices?

Denying reasonable claims

Federal and state statutes require that insurance companies issue policies in good faith. In layman’s terms, that means that they only issue policies that the company intends to uphold. Unfortunately, insurance companies sometimes try to trick and manipulate policyholders when they try to use the coverage that they purchased. Denying valid claims is an example of bad faith insurance practices that can leave policyholders unsure of their rights and without the financial support they require to overcome a difficult situation.

Delaying insurance payouts

Sometimes, insurance companies do not outright deny a valid claim. Instead, they make resolving the claim as difficult as possible. By delaying responses to initial filings and waiting months to issue a final check for a promised settlement, the company hopes to deter people from following through. Every additional document someone has to submit or phone call they have to make could prevent them from completing the claims process and securing the compensation they deserve. Particularly when an insurance provider has already approved a claim, delaying payout indefinitely could constitute bad faith practices.

Offering lowball settlements

A common tactic insurance companies use to mitigate losses without overtly violating policy terms involves offering a mediocre settlement. By offering someone a fraction of the coverage available as a settlement, an insurance provider could limit what the company has to pay. A settlement typically absolves the insurance provider of future responsibility for ongoing expenses. By the time the policyholder realizes the settlement is far too low to cover their losses, it may be too late to negotiate a more appropriate settlement.

In cases where an insurance company has not upheld a policy in good faith or properly responded to a claim, policyholders may have grounds to take legal action. Bad faith insurance lawsuits can lead to a judge ordering an insurance company to uphold the policy and even awarding the plaintiff additional damages. Talking about inappropriate or questionable insurance company practices at length could help people determine if they need assistance resolving a claim or taking action against an insurance company.

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