What is Insurance Bad Faith?

Bad Faith Insurance Practices occur when your insurance company delays payment of your claim, or refuses to pay your claim, for no good reason. Your insurance company has a duty to make a full investigation of your claim and pay your claim within a reasonable amount of time, and to treat you with good faith and fair dealing. The insurance company has to tell you the truth, and has to interpret and apply the words in your insurance policy the way they are written and the way they are required to be applied by the law in your State. Your insurance company is acting in bad faith when it acts in ways that are contrary to the insurance contract to avoid paying your claim – or to avoid paying all of your claim. Your insurance company is also acting in bad faith when it does not tell you about all the provisions, limitations and exclusions in your policy when you buy it; and when it makes unreasonable demands on you to prove you are entitled to receive policy benefits.

Analyzing Insurance Bad Faith

Bad faith can occur in any contractual relationship, including insurance policies. Bad faith applies to many different types of insurance including life insurance, homeowner’s insurance, property insurance, fire insurance, health insurance,  uninsured motorist insurance, worker’s compensation insurance, and disability insurance.

Some States (and many insurance companies) have adopted the Uniform Unfair Claims Practices Act (a copy can be found here http://www.naic.org/store/free/MDL-900.pdf). Most states have various laws on the books that require insurance companies to treat insureds under different types of insurance policies a certain way. When an insurance company wrongfully denies your claim, you may be able to recover damages for emotional distress caused by the insurance company denying or delaying your claim or by the way the insurance company treated you, medical bills, lost wages, costs of litigation,  attorneys’ fees, and other incidental damages (such as mileage for trips you had to take to see a lawyer) in addition to your contractual benefits.  Some States, including Mississippi, allow you to collect “extra-contractual” damages far in excess of your contractual losses when your insurance company commits bad faith. Those damages may include punitive damages, which is an amount of money the insurance company has to pay to set an example, and to deter your insurance company and other insurance companies from mistreating other insureds the same way in the future.

By way of example, Mr. Van Cleave represented a widow who was wrongfully denied $5,000 in life insurance proceeds after her husband died. At trial, the Jury saw evidence of the insurance company’s bad faith conduct and gross disregard of the widow’s rights, and awarded the widow $1.5 million dollars in contractual, compensatory and punitive damages.  After attorney’s fees and penalties were added, the insurance company had to pay a $2.4 million dollar judgment. Unfortunately, insurance companies continue to take advantage of us every day; and this is only one example of bad faith conduct.

Whether your insurance company has committed “bad faith” in a given situation is determined by a careful analysis of all the facts of that situation. If you or a loved one feel like you may have fallen victim to bad faith insurance practices, contact Van Cleave Law today. Our dedicated legal team has the knowledge and experience needed to stand up to your insurance company.  Many times, our intervention can help you resolve your claim without you having to file a lawsuit against the insurance company or even pay any attorney’s fees.