Most Common Bad Faith Practices By Insurance Firms

Last updated on: September 5, 2022

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Insurance companies have a duty to policyholders to act in good faith and refrain from unfair dealing. The duty to act in good faith comes from the contractual relationship that is created when an insurance premium is paid, and a policy has been issued. If you believe that your insurance company knowingly and intentionally violated its duty by denying your claim, you may be able to bring a breach of contract claim alleging bad faith.

As part of their duty to act in good faith, insurance companies must investigate insurance claims promptly and keep policyholders informed. Additionally, insurance companies have a legal obligation to provide a reasonable explanation when a claim is denied. If your claim was wrongfully denied, the lawyers specializing in bad faith insurance practices from Zinda Law Group can evaluate your claim and determine if your insurance company has acted in bad faith.

For a free consultation with a Zinda Law attorney near you, call (800) 863-5312 today.

Most Common Bad Faith Practices By Insurance firms

Bad faith has been difficult for courts to define. The term good faith describes honest dealing. However, whether someone engaged in honest & fair dealing is highly contextual. Good faith is not absolutely defined by the law. It is an ideal. Insurance companies may choose to apply the “fine line” concept to the definition and hide behind the “fine print” of your policy. By law, the insurance companies must adhere to a standard of (1) promptly processing and addressing a claim; (2) pay portions of the claim that are not disputed; (3) keep the policyholder apprised of the status of the claim; and (4) provide reasonable explanation of any denials, or partial denial, of your claim. The facts and circumstances of your case will be crucial to proving the insurance company denied your claim in bad faith.

Good faith requires honest belief or purpose, a faithful execution of promises, disclosure of advantages during negotiation, and the absence of fraudulent intent. By contrast, dishonesty or fraud in a transaction constitutes bad faith. If your insurer improperly denied your claim, you may be able to pursue compensation by filing a bad faith claim against them.

There are a number of bad faith practices that an insurance company can engage in. Some of the most common acts of bad faith by insurance firms are as follows:

Failure to Communicate

An indication of insurance bad faith could be a failure to acknowledge receipt of documentation after you file your claim. Insurance companies are expected to notify you of critical information regarding your claim and to promptly tell you of its conclusions. Furthermore, insurance representatives are not allowed to disregard your questions. Your insurance company represents your interests and should not keep their findings from you.

Wrongful Denial

Denying a claim without a justifiable reason is considered bad faith in most cases. Of course, a claim could be denied due to a mistake or error.  When there is a reasonable basis for the mistake, the insurance company is still acting in good faith. It is important that your insurance company, holding your policy that you have paid for, represents your best interests. It is also important to recognize that your insurance company is, generally, a for-profit business. As a policyholder, you must be diligent in protecting your interests.

Unreasonable Delay

If the insurance company is unreasonably postponing your payment, it is most likely acting in bad faith. In cases like this, the insurance company has already made a full assessment and agreed to cover the damages that qualify under the policy. They are making you wait for your payment. They may offer an “early settlement” of a lesser amount, “so you won’t have to wait”. If there is no good reason for the payment to be delayed, a court is likely to find that the insurance company is acting in bad faith.

Unreasonable Demands

After an accident, the insurance company will ask you to provide proof of damage. At this stage, there is an opportunity for the insurance company to guard its profits by making unreasonable demands from the policyholder. Your insurance company might request multiple medical examinations when your injuries from the accident have been well documented. You may feel you are in an adversarial position with your insurance company.

Failure to Investigate

Failing to act promptly or delaying the investigation of your claim constitutes bad faith in most situations. Additionally, the investigation must be full, fair, and thorough. When the insurance company draws out the investigation process, only to ignore key facts and evidence, they have most likely acted in bad faith.

Undervaluing Claims

By nature of the industry, an insurance company holds an advantage by undervaluing claims. Proving that your claim has been undervalued is a fact-intensive inquiry that requires a lot of proof. You need to explain why the facts of your case require the compensation you seek. You also have to show that the insurance company intentionally undervalued your claim; show that they deviated from their custom valuation practices; and paid you significantly less than average compared to payouts for similar injuries. Most insurance companies have the support that they need for their side of a “dispute” already on-hand for such occasions.

Changes in Policy

Changing your policy without your knowledge or consent is considered bad faith in most circumstances. The insurance company may have canceled your coverage without notice or modified your plan in a way that requires notice (e.g., an insurance company may increase the cost of your premium without notifying you, leading you to underpay and lose coverage). 

Whether an insurance company engaged in bad faith is a highly contextual inquiry. If you believe that your insurance claim was unjustifiably denied, don’t be afraid to question the insurance company’s decision. Start documenting the information pertaining to your claim and contact a bad faith injury lawyer who can use the facts to craft a legal strategy. To speak with an attorney near you experienced with insurance claim discrepancies, call (800) 863-5312 today.

Get Help From Zinda Law Group Today

The lawyers from Zinda Law Group specializing in bad faith insurance issues are no stranger to these types of tactics. When we see insurance companies refusing to perform their obligations, we begin looking for ways to help our clients pursue compensation. To best serve your claim, we will analyze the facts of your case and determine the extent to which your insurance provider acted in bad faith.

By calling (800) 863-5312 you can schedule a free consultation with our experienced insurance lawyers. Once we learn the facts of your case, we can discuss your available legal options, at no cost to you. Additionally, we offer our clients a No Win, No Fee guarantee, which means that you will not pay anything unless we get a favorable outcome in your case.

Meetings with attorneys are available by appointment only.