In personal injury law, bad faith refers to an insurer’s failure to fulfill its obligations to its policyholders or claimants honestly and reasonably.
This term is commonly applied when an insurance company improperly denies a claim, delays payment, or fails to investigate a claim adequately. Bad faith actions violate the implied covenant of good faith and fair dealing in every insurance contract.
Definition of Bad Faith
Bad faith in the context of insurance refers to dishonest practices by insurers, such as refusing to pay a claim without a reasonable basis, failing to communicate important information to the claimant, or not conducting a thorough and prompt investigation of a claim.
Examples of Bad Faith in Personal Injury Cases
- Unreasonable Delays: Delaying investigation or payment of claims without a valid reason.
- Inadequate Investigation: Failing to properly investigate a claim, ignoring evidence, or not considering all aspects of the claim.
- Refusal to Pay a Valid Claim: Denying a claim without a reasonable basis or without proper investigation.
- Low-Ball Offers: Offering significantly less money than a claim is worth to settle quickly and cheaply.
- Threatening the Insured: Using threats or other unfair tactics to discourage a claimant from pursuing a valid claim.
Legal Aspects of Bad Faith
- Breach of Contract: Bad faith actions can be seen as a breach of the insurance contract, entitling the claimant to sue for breach of contract damages.
- Tort Claims: In many jurisdictions, bad faith actions by an insurer can also constitute a tort, allowing the insured to recover damages beyond the original policy limits, including punitive damages.
- Statutory Remedies: Some states have statutes specifically addressing insurer conduct, providing guidelines and remedies for handling claims in bad faith.
Steps to Address Bad Faith
- Documentation: Keep detailed records of all communications with the insurance company, including dates, times, names, and summaries of conversations.
- Compliance with Policy Requirements: Ensure all policy conditions are met, such as timely notification of the claim and submission of required documentation.
- Legal Notice: Send a formal complaint to the insurer, stating why their actions constitute bad faith.
- State Insurance Department Complaint: You can file a complaint with the state insurance department, which can offer assistance and impose penalties.
- Legal Action: Consult with an attorney specializing in insurance law to discuss potential legal actions for bad faith, which can include lawsuits for contract damages and tort claims.
Importance of Recognizing Bad Faith
- Protection of Rights: Understanding what constitutes bad faith helps policyholders protect their rights and ensure fair treatment under their insurance policies.
- Recovery of Due Compensation: Identifying and proving bad faith can lead to the recovery of the claim’s full value and possibly additional compensation for the insurer’s misconduct.
- Deterrence: Effective legal action against bad faith practices serves to deter insurers from engaging in similar conduct with other policyholders.
Conclusion
Bad faith actions by an insurer can significantly impact a claimant’s ability to recover adequate compensation in personal injury cases. Insured individuals must recognize the signs of bad faith and understand their legal rights and remedies. Legal recourse, including claims for damages resulting from such practices, ensures that insurers uphold their duties and treat claimants fairly.
