How do insurers commit bad faith?

On Behalf of | Mar 25, 2022 | Insurance Bad Faith

If you sustain injuries or damages in an accident or catastrophic event, you may count on your insurance to cover your losses. After all, that is why you pay insurance premiums each month.

Unfortunately, while you may live up to your end of the insurance deal, insurers do not always do the same. Upon receiving your claim, yours or the other party’s insurance company may fail to investigate, negotiate or settle your claim in good faith. In other words, the insurer may act in bad faith, or commit “insurance bad faith.” Insurance bad faith refers to deceptive or unfair practices insurers use to minimize settlements or avoid paying them entirely. FindLaw explores the common bad faith tactics of which you should remain aware.

Failure to conduct a complete investigation

Insurance laws require insurers to act in good faith and to deal with each claim fairly. Part of dealing with a claim fairly involves conducting a thorough and prompt investigation. Failure to do so violates the law and the terms of the policy in question as well as potentially jeopardizes the claim as a whole. For these reasons, failure to conduct a prompt and complete investigation is an example of bad faith.

Unreasonable delays

Most states place time limits on how long insurers have to investigate and settle claims. Though deadlines vary across state lines, most jurisdictions require insures to make decisions within 15 to 60 days. Despite these laws, many insurers will delay making decisions in an attempt to drag out a claim and, hopefully, deter claimants from pursuing compensation. Unreasonably delaying claims is a common bad faith insurance tactic.

Misrepresenting the law or policy language

Many insurers deliberately use complex jargon in their policies. They do this so that when a policyholder does file a claim, an agent can interpret the language in a way that suits the company and not the insured. A part of an insurer’s duty of acting in good faith involves being truthful in all dealings, including its statements regarding the law and the policy.

Offering a low-ball settlement

One of the most common bad faith insurance tactics that insurers engage in is offering claimants far less money than their claims are worth. Unfortunately, too many claimants accept these settlements, assuming the amount is fair and reasonable. Insurers know and rely on this fact to bolster their own profits.

These are just a few examples of insurance bad faith. If you have a sizeable insurance claim, it would be in your best interests to work with a lawyer who is familiar with all bad faith tactics, and who can help you avoid falling victim to them.