In many cases Insurance Companies, the goal of the insurance industry is to pay as little as possible on insurance claims, and to pay any amounts owed as slowly as possible. Insurance providers then collect premiums and can invest premium dollars before claims are made under the policy. The more time it takes for claims to be made, the more time the insurer has to invest. But in many instances, taking this business calculation too far can result in an even greater loss when it crosses into the territory of bad faith claims. It is important to claimants and insurance providers alike to know the acts that are considered good faith and bad faith.
Broadly speaking, bad faith refers to when an insurance company wrongfully denies a claim. The obligation to act in good faith is implied in every insurance policy. This means that even if an insurance company’s policy does not expressly state, or write-out in plain language, that its employees must treat each claim with good faith investigation and consideration, it still must be done. Insurance company employees must carry out the insurance company’s instructions diligently and faithfully. When bad faith is particularly offensive, punitive damages may be awarded which means courts and juries are willing to award more money to a claimant who made a valid claim that was improperly considered by an insurance company. There are many types of damages that can be awarded to an injured claimant.
There is a wide range of things that can be considered “bad faith,” such as a failure to receive a claim or process the claim, delays in processing the claim and other uncorrected mistakes.
Good faith is more than following the contract’s basic requirements. It is the job of insurance companies to ensure that the policyholder is completely and honestly informed as to all the factual and legal grounds that apply that excludes coverage.
So what is good faith?
The “good faith” duty owed by the insurance provider is direct service and peace of mind that the insurance provider will assist the insured by promptly paying for his or her car repairs and medical bills.
- For potential customers of insurance, insurance companies should provide peace of mind so that the future insured is aware of insurance purchase details and limitations.
- Sympathize and comfort claimants as warranted under the circumstances rather than treating it merely as a business or transactional matter.
- Make a thorough preliminary assessment about coverage and liability as it applies to claims, preserving claim documentation and evidence as the claim progresses in the event of a lawsuit.
- Ensure the policyholder keeps and provides relevant coverage information, including walking the claimant through the investigation process and their options.
- Explain how to complete the insurance company’s forms and how to provide the required documents that the insurance company may need in order to process a claim.
- Identify key aspects of the claims process, including potential coverage problems, all witnesses, as well as any subrogation and salvage options that apply.
Insurance companies must realize that those that purchase insurance policies are really buying peace of mind, and trust the insurance company to deliver when times are tough. It is a two-way street. Both sides have a contractual obligation not to impair the other’s ability to exercise their rights under the insurance policy contract.
Providers of insurance should also be aware of indicators that the insured, or person(s) covered in the insurance policy, understood the contract (for example, if the policy is in English and the person who signed up for insurance only speaks a foreign language), whether the applicant who signed the insurance policy contract was simply given a blank form contract to sign that the insurance company later filled in and completed, whether the questions on the insurance forms were vague or unclear such that they are unable to be understood, whether the applicant has any disabilities or other conditions like hearing and/or visual impairments that would have made it difficult, if not impossible, to understand the contract or even had memory problems that would have affected the applicant’s ability to answer an insurance contract or policy honestly. These are all important considerations that insurance companies must evaluate in order to ensure they are carrying out their duties under the law to act in good faith.
Once good faith is established, an insurance company can attempt to rescind, or take back, the insurance contract. Contract recission may eliminate the obligations of the parties under the contract. But the act prematurely or improperly rescinding a contract itself can result in a bad faith basis for a lawsuit.
Each state in the country has its own unique laws, and judges have the ability to interpret the law as they see fit. For example, some states’ laws have decided that good faith may exist where the insurance provider honestly believes that the insurance policy does not provide coverage in a first-party claim. However, in other cases, an insurance provider can ultimately be found not to owe any duties of good faith to a particular claimant, yet still be held liable. Often, it does not matter if the insurance company had good intentions and did not mean for harm to happen. All that is needed is to show that the insurance company should have paid what is due under the insurance policy, but failed to do so.
The often complex laws surrounding insurance claims and potential bad faith cases mean that an injured claimant needs the guidance and help of an experienced attorney in order to understand their rights under the law. Whether an insurance company acted in bad faith or not is a legal question that should be left to experts who can advise you about the next steps you can take.
Contact an experienced personal injury lawyer
Navigating complex personal injury cases and handling insurance companies can make the recovery process even more difficult. Experienced attorneys strategically weigh the cost and benefits of each case to minimize the time and expense involved while maximizing their clients’ compensation.
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The Pusch & Nguyen Law Firm has helped countless Texans handle their insurance disputes. Our experienced trial lawyers have gone up against some of the biggest names in the insurance industry while successfully bringing home payouts for clients. Our successful reputation speaks for itself, and with offices in both Houston and San Antonio, we are well equipped to assist Texans who are in dire need of our services. Register online for a free case evaluation or call us today at 713-528-8108 (Houston) or 210-702-3000 to schedule an appointment with a member of our team.