How Do I Prove I Have Bad Faith Insurance?

Your insurance company owes what is known as a “duty of faith” to its policyholders. When they fail to meet that duty of faith, they may be in violation of the law, a term known as “acting in bad faith.”

If you believe your insurance company is acting in bad faith, you may be eligible for compensation that would be higher than the actual claim.

What Is Bad Faith Insurance?

You pay your insurance premiums faithfully because you expect them to be there when you need them. Paying for insurance is a way to be prepared in an emergency and be ready for the unexpected.

When your insurance company is dishonest, they are acting in bad faith. This may make you eligible for a bad faith claim against the company. Bad faith laws are designed to protect you from actions that could be detrimental to you.

Although an insurance company does have the right to deny a claim that is fraudulent, they do not have the right to reject claims that are valid.

What Signs Indicate Bad Faith Insurance?

There are several signs that your insurance company is acting in bad faith. These include:

  • Refusal to pay a claim without reasonable basis
  • Refusal to investigate a claim in a timely manner
  • Requiring outrageous amounts of paperwork or evidence
  • Settling for far less than the claim

If your insurer is engaging in any of these acts, it may be time for you to get a lawyer to represent you.

Proving a Bad Faith Claim

Although each state has its own laws regarding what is necessary to prove a bad faith claim, there are some similarities. Your first step is to prove that your insurer breached its duty of good faith by refusing to compensate you for a loss covered by the policy without proper cause.

In addition, you may be required to prove that denying benefits was unreasonable and showed reckless disregard for their insured. Overall, you will have to prove that the insurance company denied your claim with no valid reason.

Reasonable Person Requirement

Some states have what is called a “reasonable person requirement.” This means that your insurance policy must contain language that someone of reasonable intelligence would understand.

That means that if your insurance policy included complicated or vague wording, it may not be valid under the law. You may be able to use this requirement to challenge the insurance company.

Not All Claims Are Denied in Bad Faith

It is also important to remember that not all claims are denied in bad faith. There may be legal restrictions in your policy that would allow your insurance company to deny your claim.

This is why it is critical that you speak to an attorney in order to determine if the claim denial was in bad faith or legally binding.

Compensation for Bad Faith Insurance

If your bad faith insurance claim is successful, your insurance company could pay damages that far exceed what the initial claim payment may have been. Not only will they be required to pay full damages, but they could also be required to pay:

  • Attorney fees
  • Economic loss
  • Emotional distress
  • Liability for judgements in excess of policy limits
  • Punitive damages
  • Statutory penalties and interest

According to bad faith insurance lawyers Kerley Schaffer, insurance companies sometimes act in bad faith because they’re betting you won’t fight back against them.

They hope you’ll give up because you assume you won’t be able to afford to take them on in court. Holding bad faith insurers accountable shows them that you aren’t going to fall for it.

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