{"id":352530,"date":"2017-03-07T13:51:29","date_gmt":"2017-03-07T18:51:29","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-law\/consumer\/credit-banking-finance\/bad-faith-insurance-claims-denials-overview.html"},"modified":"2024-02-28T09:17:08","modified_gmt":"2024-02-28T14:17:08","slug":"bad-faith-insurance-claims-denials-overview","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/consumer\/credit-banking-finance\/bad-faith-insurance-claims-denials-overview.html","title":{"rendered":"Bad Faith Insurance Claims Denials Overview"},"content":{"rendered":"\n
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Bad Faith Insurance Claims Denials Overview<\/h1>\n
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\n By Olivia Wathne, J.D.<\/a> | Legally reviewed by Melissa Bender, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n

The reason you pay for an insurance policy is an attempt to manage risk. Normally, that’s exactly what happens. However, some unscrupulous insurers will drum up an excuse not to pay. This is referred to as a bad faith insurance claim denial. <\/p>\r\n

The following article provides an overview of the issues that frequently arise in bad faith insurance claim denial cases.<\/a><\/p>\r\n

What Is Bad Faith Insurance?<\/h2>\r\n

Bad faith insurance refers to the wrongful actions of an insurance company towards its policyholder. There is a duty of good faith inherent in every insurance contract. Under bad faith law, insurers are obligated to handle claims fairly, honestly, and promptly. <\/p>\r\n

When an insurance company unreasonably denies a legitimate claim or engages in misrepresentation, it may be deemed to have acted in bad faith. Policyholders have the right to file insurance bad faith claims. They can seek compensation for the initial claim and potential punitive damages as a deterrent. <\/p>\r\n

This applies to various types of insurance, including health, auto, and homeowners insurance. It’s important that policyholders are aware of their rights and hold insurers accountable for bad faith claim handling practices<\/a>.<\/p>\r\n

Good Faith and Fair Dealing<\/h2>\r\n

Insurance is a form of contract<\/a>. The insured exchanges the payment of premiums for the insurer’s promise that they will pay compensation for legitimate claims. As with other contracts, insurance agreements include duties between the parties. Among these duties is the implied covenant of good faith<\/a> and fair dealing<\/a>.<\/p>\r\n

The implied covenant of good faith and fair dealing is the expectation that parties to a contract will deal with one another in an honest manner. It is also the expectation that a party will not seek to frustrate the other party’s ability to receive the benefits sought in the contract.<\/p>\r\n

A lawsuit arising from a bad faith insurance claim denial is based upon the insured’s complaint that the insurer is unfairly seeking to avoid their obligations under the agreement. This is usually through deceit or by using technical excuses for their breach of the agreement<\/a>.<\/p>\r\n

Breach of the implied covenant of good faith and fair dealing normally creates a common-law tort cause of action<\/a>. However, some states have enacted laws that limit or remove the availability of this cause of action.<\/p>\r\n

First-Party Bad Faith Insurance Denials<\/h2>\r\n

First-party bad faith insurance denial occurs when:<\/p>\r\n