Insurance Company Bad Faith Tactics and Examples

Being injured or suffering property damage is difficult enough. It's even worse when your insurance company doesn't live up to their end of the insurance contract.

Providers in the insurance industry must appropriately handle legitimate claims. General contract and insurance law principles require insurers to meet contractual obligations. Your insurance company must investigate, negotiate, and settle claims in good faith.

On most occasions, the claims process proceeds as expected. If the insurance company violates this duty, it can be liable for its bad-faith actions in court. Bad faith insurance claims happen when an insurer does not behave in a fair and appropriate way while processing a claim. It is defined as dishonest or unfair practices.

Review these insurance company bad faith tactics and examples. They can help you identify whether your insurance company is acting in bad faith. For additional assistance, contact an experienced insurance law attorney in your area.

Common Bad Faith Insurance Tactics

States often define insurance companies' bad faith insurance practices. Examples of bad faith insurance practices can vary, but there are some common elements.

A common law claim requires proof that the insurer's conduct was unreasonable and that the insurer knew or recklessly disregarded the fact that its conduct was unreasonable.

A statutory claim may have a lower standard of proof. Such a claim may only require that a benefit to which the insured was entitled under the policy had an unreasonable delay or was denied. A bad faith case can arise under any number of different circumstances. Getting legal help is essential.

An experienced bad faith insurance claim attorney can provide legal advice. If you believe your insurer has engaged in any of the common bad faith tactics listed below, they can explain whether you have grounds for a bad faith lawsuit . 

Below are some examples of bad faith insurance claims.

Unreasonable Delays

An insurance company may drag out the time it takes to investigate a claim before agreeing to pay. This tactic tests whether the policyholder will give up pursuing the claim. Most states set deadlines for an insurance company to accept or deny a claim. This timeframe ranges from 15 to 60 days.

EXAMPLE: An insured has a homeowners insurance policy. The home suffers water damage from a broken pipe. After the policyholder submits a first-party claim, the insurance company delays investigating the claim for over two months. The insurer delays the claim in hopes that the insured handle the problem without further pursuing the insurance claim.

Failure To Conduct a Complete Investigation

Every insurance policy contains an implied duty of good faith and fair dealing. This requires an insurance company to conduct prompt and thorough investigations into a policyholder's claim.

EXAMPLE: An insured has an auto insurance policy with comprehensive coverage for the vehicle that covers any damage to the car. The policyholder submits a claim to the insurer when the vehicle sustains damage while parked on the street. The claims adjuster makes a couple of phone calls to the policyholder and denies the claim. The claims adjuster concluded that the claimed damage to the car was pre-existing. The adjuster did not consider the repair shop estimates or inspect the damage in person.

Deceptive Practices

An insurer could fail to disclose the existence of insurance coverage so they don't have to pay a claim. Your insurance company fails to notify you of a claim filing deadline and doesn't provide the papers necessary to complete your claim on time.

EXAMPLE: Your small business insurance policy may cover lost income after a covered event. After experiencing a theft of essential work equipment, your company cannot complete an important job. Your insurer is notified of the incident, but also needs to inform you that you could file a claim for lost income in addition to the claim for the equipment.

Offering Less Money Than a Claim Is Worth

Insurance companies must pay a valid claim. It cannot refuse to pay claims to bolster profits. Tactics such as lowballing or offering less money than a claim is worth is an act of bad faith.

EXAMPLE: A tree fell onto the roof of your house. The insurance company is offering to pay about half the value of the repair quotes you have received. Your policy limits are much higher than the amount the insurer offered for the repair.

Misrepresenting the Law or Policy Language

Insurance companies may not interpret policy language against the claimant on purpose. Insurance companies must be truthful in their statements about your policy and the law as part of the duty of good faith and fair dealing.

EXAMPLE: You may have been partially at fault for the car accident. An insurance company states that you could be found guilty of insurance fraud if you make an auto insurance claim.

Refuse To Pay a Valid Claim

Under state law, insurance companies must use fair claims practices. If the insurer denies a claim the policy should cover, this action could qualify as bad faith.

EXAMPLE: An uninsured motorist hits your car and you suffer personal injury and property damage. The uninsured driver admitted fault for the accident in the police report. You have insurance that covers this circumstance. After submitting your claim, your insurance company refuses to pay for the damage. This is a breach of contract and could qualify as bad faith.

Making Threatening Statements

An insurance company should never make a threatening statement to policyholders or third parties making claims. If an insurance company makes a threat, contact an attorney right away. You may also want to contact your state's insurance department.

EXAMPLE: The insurance company threatens to take harsh legal action against you or file criminal charges if you submit a claim.

Experiencing Bad Faith Tactics? Consult an Attorney

It's important to understand that the insurance adjusters making decisions about your claim do so in the insurance company's interest as well as that of the policyholder. Unfortunately, some insurance carriers take unreasonable measures to avoid paying rightful claims.

Working with an experienced local bad faith insurance attorney can ensure you have an advocate. Consult with a bad faith insurance lawyer to determine if bad faith tactics have affected your claim. They can explain your legal options.