5 Examples to Better Understand Insurance Bad Faith
After purchasing an insurance policy, the insurance company is expected to keep its word by providing compensation after an incident. However, there are some instances where your insurer or the defendant’s insurer may act in bad faith. This is when they intentionally fail to fulfill their obligations.
While this is a somewhat common practice in San Diego, it is highly unethical. It often leaves policyholders struggling financially, especially in cases of serious injuries and disabilities.
If you suspect your insurer is acting in bad faith, contacting a long-term disability lawyer in San Diego is important. This legal professional can help you deal with the situation and protect your rights.
Here are five real-life situations to help you understand better how insurance companies can practice bad faith.
1. Denying a Claim
This is the most common example of bad faith when it comes to insurance.
Imagine filing a claim for a covered loss like damaged property only for your insurer to reject it outright without a reasonable explanation. In some cases, the company may not do proper research or ignore evidence that supports the claim.
For example, a homeowner who was affected by Hurricane Hillary that hit San Diego could have had their policy denied due to claims that the policy doesn’t apply. Denying valid claims is unethical and may also violate state insurance laws.
2. Delaying Payment Claims
When it comes to settling claims, delays are sometimes unavoidable depending on the nature of the case. However, in some cases, insurance companies will delay payments, hoping that people will drop their claims or accept low payments because of frustration.
In California, insurance companies are required to accept or deny a claim within 40 days. Once accepted, the insurer must settle in 30 days. Failure to stick with this timeline goes against their duty to act in good faith.
3. Making Low Settlement Offers
It’s not a secret that insurance companies are constantly trying to reduce the settlement they ought to pay. Insurers may try to minimize their payouts by offering amounts that are way lower than what the claim is worth. This tactic is very common in personal injury and long-term disability cases.
The insurer may argue that the damages or injuries are less serious than what was reported.
4. Misrepresenting Policy Terms
In this example, the insurer may give you misleading or false information about your coverage, what is excluded, or the policy limits to avoid paying the claim. Also, the insurer may fail to explain your rights during the claims process.
This may leave policyholders confused about what they are entitled to. To avoid this, carefully review your policy and consult an attorney.
5. Failure to Defend
Insurance policies, especially liability covers, must defend the policyholder against lawsuits and indemnify them for the losses covered. When an insurance company fails to provide this protection without reason, they are acting in bad faith.
For example, you are a homeowner, and a person ends up getting injured on your property. The insurer ends up denying this claim, stating the accident is not included in the policy coverage. You are then left to carry the burden of legal costs.
Conclusion
Bad faith in insurance can take different forms. Nevertheless, these unethical practices leave policyholders to deal with difficult financial and emotional situations. Ensure that you understand your policy to defend your rights.
