Insurance Bad Faith Claims: What Are They and How to Pursue Them

Insurance is meant to provide protection and peace of mind in times of need. However, there are instances where insurance companies may act in bad faith, denying or undervaluing valid claims. In such cases, policyholders have the right to pursue insurance bad faith claims. In this blog post, we will explain what insurance bad faith claims are, how they can arise, and the steps involved in pursuing them.

Understanding Insurance Bad Faith

Insurance bad faith refers to an insurance company’s unreasonable or unfair actions or practices when handling a claim. It occurs when an insurer fails to fulfill its contractual obligations, neglects the duty to act in good faith, or intentionally acts against the best interests of the policyholder.

Examples of Insurance Bad Faith

Insurance bad faith can manifest in various ways, including:

a) Denial of Valid Claims: An insurance company unreasonably denies a claim without a valid reason or fails to thoroughly investigate the claim.

b) Delayed Claim Processing: An insurer unjustifiably prolongs the claim investigation or payment process, causing unnecessary delays.

c) Undervaluing Claims: Insurance companies intentionally offer settlement amounts significantly below the true value of the claim, disregarding the policyholder’s losses and damages.

d) Failure to Communicate: Insurers ignore or fail to respond promptly to communications from policyholders or neglect to provide necessary updates on the claim’s status.

e) Breach of Duty: Insurers fail to defend policyholders against third-party claims or fail to provide legal representation as promised in the policy.

Proving Insurance Bad Faith

To pursue an insurance bad faith claim, you generally need to establish the following elements:

a) Existence of a Valid Insurance Policy: You must demonstrate that you had a valid insurance policy in force at the time of the incident, and you complied with the policy’s terms and conditions.

b) Clear Obligations: You should identify the specific obligations the insurance company had under the policy and demonstrate how they failed to fulfill those obligations.

c) Lack of Reasonable Basis: You need to show that the insurance company’s actions or decisions lacked a reasonable basis and were not supported by the evidence or policy provisions.

d) Awareness of Bad Faith: You must demonstrate that the insurance company knew, or should have known, that their actions constituted bad faith.

e) Damages: You need to provide evidence of the damages you suffered as a result of the insurer’s bad faith conduct, such as financial losses, emotional distress, or other related harm.

Steps to Pursue an Insurance Bad Faith Claim

If you believe you have a valid insurance bad faith claim, consider taking the following steps:

a) Document Everything: Keep thorough records of all communication with the insurance company, including emails, letters, claim forms, and phone conversations. Document dates, times, and details of each interaction.

b) Review the Policy: Familiarize yourself with the terms and conditions of your insurance policy to understand your rights and the insurer’s obligations.

c) Complain to the Insurer: File a formal complaint with the insurance company, clearly outlining the issues you believe constitute bad faith and requesting a resolution.

d) Consult an Attorney: Contact an experienced insurance bad faith attorney who can evaluate your claim, guide you through the legal process, and represent your interests in negotiations or litigation.

e) Gather Evidence: Collect all relevant evidence supporting your claim, including medical records, expert opinions, witness statements, and any documentation demonstrating the insurer’s unreasonable actions or decisions.

f) Negotiation or Litigation: Your attorney will work with you to negotiate a fair settlement with the insurer. If a resolution cannot be reached, they will file a lawsuit on your behalf and pursue your claim in court.

Insurance bad faith occurs when an insurance company unreasonably denies, delays, undervalues, or otherwise mishandles a valid claim. Policyholders have the right to pursue insurance bad faith claims to seek appropriate compensation for their losses. By understanding the elements required to prove bad faith, documenting interactions, seeking legal guidance, and gathering supporting evidence, policyholders can hold insurance companies accountable for their actions. Consult with an experienced insurance bad faith attorney to evaluate your claim, protect your rights, and pursue fair treatment and compensation from the insurer.

A personal injury lawyer can help you understand your legal options and negotiate a fair settlement on your behalf. Click here to schedule a free consultation with one of our skilled California lawyers to learn more about your options. Or call our offices at 707 549 8166.