When you purchase an insurance policy you enter into a contract with the company from which you purchased the policy from. The policy will state what the insurance company does and does not cover and what type of benefits you acquire from purchasing the specific plan. In most cases, these contracts are upheld by both parties. In other cases, however, the insurance company may not act in accordance with the policy that is issued.
This is referred to as a bad faith claim. Bad faith claims can occur under many circumstances, however, the following events are the most common acts of bad faith:
- Underpaying a Claim: An insurance adjustor reviews a case and purposefully rates it for a far less value than it is worth. This typically happens in accident claims where a person is requesting compensation for injuries.
- Denying Benefits: An insurer will deny coverage for medical treatment, payment on claims or some other benefit even though the policy states that the insurance company is required to provide those benefits.
- Redefining Terms: An insurer, when faced with claims, may redefine exactly what the policy covers. This is one of the most common acts of bad faith.
- Delaying Payment or Evaluation: To prevent issuing payments, an insurance company may delay payments or delay the evaluation of a case. The longer the delay, the more likely it is that the applicant will drop the claim.
- Failing to Pay a Claim Against the Policy: An insurance company may fail to pay claims to the insured if the claim was produced by separate individual against the insured. For instance, if your insurance company provides auto coverage and you are involved in an accident, the insurer is required to cover the accident so long as the policy is current.
How Should a Victim Respond?
If you believe you have become a victim of a bad faith claim, you should seek legal representation. An insurance policy is a binding contract and therefore must be honored by both parties. An attorney can represent you before your insurance company to force them to hold up their part of the contract. If necessary, the attorney can also sue the insurer on your behalf.
How Lessen the Risk of Bad Faith Claim
While it may not be possible to avoid acts of bad faith, you can lessen your risk by using the following tips before you purchase any type of insurance policy:
- Review the Company: Perform an online search for reviews of the company. Are there multiple complaints against them for bad faith claims? Be sure to do a thorough examination of the company. Also, do your best to stick to reputable review sites and avoid complaint boards.
- Read the Policy Before Purchasing: Do not simply take the word of your insurance agent. Be sure to review the policy carefully and exhaustively before agreeing into the contract. Additionally, ask any relevant questions you may have before purchasing the policy.
- Keep Policies Current: If you have a policy which you purchased several years ago, it is time to review that policy and replace it if necessary. Older policies may no longer address modern problems. An insurer’s nonpayment of a claim due to an old policy is not grounds for bad faith claims.