Insurance Bad Faith

Insurance companies may act as if they are on your side when they are getting you to purchase a policy. They encourage you to buy a certain feature or expand your coverage, which sounds as if they are looking out for you. They always return your phone calls when you are looking to expand your coverage.

That relationship may take a significant shift the moment you attempt to file a claim. They may become more difficult to worth with and less responsive. There are carriers that may try to dissuade you from filing a claim, and they will find whatever loophole they can to avoid paying out money.

It can be frustrating after you have been in a car accident or after your home was damaged in a storm, and that financial safety net that you have relied on does not appear to be there. Although it is frustrating to have to go through the legal process to get something you deserve, it may be necessary to force the insurance company to fulfill its obligations.

A lawyer will handle the tough negotiations with your insurance carrier, relieving you of the task. They can make sure that your rights are protected and the insurance company does what it promised.

What Is Insurance Bad Faith?

In general, insurance bad faith means an insurance company has acted unreasonable or unfairly. If the matter gets to a judge, it will be their decision to determine if the company acted in bad faith because of unreasonable or unfair conduct and if it knew that those actions were unreasonable or just disregarded that fact.

Every year, your insurance company accepts your premiums and invests that money, which can double or even triple the company’s assets. When you make a claim, that means they must dispense money of which they do not wish to lose.

Insurance companies are a for-profit business, meaning their primary focus is to make money. Others are public companies, and they have an obligation to their shareholders to increase their bottom line. Therefore, it is in the insurance company’s best interest not to pay out a claim. They might turn to bad faith tactics to make that happen.

Refusing to pay out a claim that a person is rightfully owed is not the only example of insurance bad faith. Although there are isolated bad companies or entities, there are a few tactics that are an industry-wide problem. The common tactics include the following:

  • Undue delay: When an insurance company delays how long it takes to communicate with the insured or does not provide a response to their claim in a reasonable amount of time, it can be argued that they are acting in bad faith.
  • Inadequate investigation: When a policyholder files a claim with an insurance company, the latter must investigate. However, if the company does not allocate sufficient resources or time for that investigation and denies the claim based on that insufficient investigation, it can be held liable.
  • Refuses to defend a lawsuit: The insurance company has an obligation to defend its policyholders in the event of a lawsuit against a matter that the policy specifically protects. One way to do that is to pay for the policyholder’s lawyer. Refusing to assist is a sign of bad faith.
  • Threats: There have been instances in which the insurance company has threated its own policyholders, claiming they will sue them or file criminal charges for filing a claim, even though the claim falls within policy limits.
  • Low-balling a claim: Insurance companies will do everything that they can to avoid having to pay you the full amount. As an industry policy, they will offer you less than an amount that they should be offering you. Insurance companies must pay a valid claim by law.
  • Unreasonable interpretation of the policy: Insurance policies can be complicated documents and difficult to sift through without patience and the proper understanding. There are certain insurance companies that will take advantage of this and exploit it as a means of denying your claim. They will do this by arguing certain language in the policy prohibits you from making a claim on certain damage when that is not the case.
  • Unjustifiable denial: Often, an insurance company will deny your claim without a valid reason. They are counting on individuals not appealing it and walking away. They do not want to hand out money unless they must.
  • Lack of communication: The insurance company has an obligation to maintain the open lines of communication with you throughout the claims process. They must inform you of their decision in a timely manner and not leave you uninformed. Failure to do so can be interpreted as acting in bad faith.
  • Unreasonable requirements: Another delay tactic that insurance companies use is to make unreasonable demands on you, such as requesting irrelevant documents. When you cannot produce these documents, they would deny your claim.

If you believe that your insurance company has acted in bad faith, it is within your rights to question their decision. Submit a request in writing asking them to justify their decision and explain it to you in writing. Having them reply in writing forces them to have to compose a legitimate explanation that they will have to defend later if the matter winds up in court.

How Do I Know My Insurance Company Acted in Bad Faith?

All these examples do not mean to imply that whenever you are denied a claim, it is because the insurance company acted in bad faith. There are times when you will file a claim that is denied because it is not covered by your insurance.

When you are unclear about whether the company acted in bad faith, consult your policy to determine if the denial had any merit. Policies are long and complicated by design. They contain exceptions and convoluted language that is crafted to make it easier for an insurance company to deny your claim.

If you suspect your insurance company acted in bad faith, a lawyer can review your policy with you to determine whether you have a case.

What Are My Options if My Insurance Company Acted in Bad Faith?

You have a couple of options if your insurance company acted in bad faith. The first, and less desirable, is you can walk away after your claim is rejected. This is the outcome your insurance company prefers, as it will allow them to save money.

Your other option is to hire a lawyer who will file a claim on your behalf with the insurance company. If the matter is not resolved through a settlement, it can go to court. Among the awards you could receive should you win is the full policy amount in which you were owed. There are also instances in which you could also receive more if the court finds that the insurance acted in bad faith.

The court may even award you with punitive damages if the bad faith was particularly egregious. You could also receive compensation for any other financial losses associated with the situation. For instance, if your business was destroyed by a storm and the insurance company acted in bad faith, the court may force the company to compensate you for your lost profits.

The timing of when you can file a bad faith lawsuit can be complicated. New Jersey statute allows six years from when the act of bad faith occurred to file a lawsuit. Although that may seem to be a lot of time, there are certain insurance companies that will include a provision in their policy that limits your time to two years to file a bad faith claim. That is why you should not hesitate to hire an insurance lawyer once you suspect bad faith.

New Jersey Insurance Lawyers at Herold Law Will Help You Prove Your Insurance Company Acted in Bad Faith

After you were hurt in an accident or your home or business suffered significant damage, you should not have to worry about an evasive insurance company that does not want to pay out a claim for which you are entitled. Our New Jersey insurance lawyers at Herold Law understand your frustration, and we will handle the matter for you. Call us today at 908-647-1022 or contact us online for an initial consultation. Located in Warren, New Jersey, we serve clients throughout the state.