What is Bad Faith Insurance?

October 5th, 2022 | by RON BELL

What is Bad Faith Insurance?

Bad faith is a legal term that has to do with the breach of responsibilities and duties that an insurance company has to its clients. Essentially, a bad faith insurance claim is a claim asserting that the insurance company has failed in its duties of reasonable and fair dealing.

Basis for Bad Faith Insurance Claims

When an insurance claim is filed, the auto insurance company automatically has duties and legal obligations that are either established by statutes, enacted by the state legislature or established laws by the state court system (common law).

Personal Injury Must Occur

Generally speaking, most bad faith insurance claims begin with a tort claim. A tort is a claim for personal injuries; the damage can be financial, contract related, physical, and/or emotional. However, for bad faith to come into play, an insurance policy must afford coverage for the personal injury.

Insurance Must Apply

Personal injury cases do not have to involve insurance coverage. Insurance coverage applies in situations where people purchase insurance to protect themselves from liability in the event that they cause someone injury or are injured themselves. This coverage is the basis for the entire insurance industry.

Types of Insurance

Individuals purchase auto insurance to help pay if they cause harm or are harmed by someone who does not have insurance or can pay for the damages they caused.

Homeowner’s insurance is purchased to protect many things. Most people think of damage to their homes. Still, another big category of coverage involved in a homeowner’s insurance policy is to pay claims when someone is injured on the property. It is a way of protecting the homeowner from a judgment against them.

In order for bad faith to exist, there must be a personal injury and an insurance policy that applies to the type of injury, the situation, or the location where the injury occurs.

What’s Next?

The next part is where things get a bit more complicated. Bad faith claims essentially state that an insurance company has to pay on a reasonably clear claim and that if the insurance company fails to pay a reasonable settlement offer, they have breached that duty.

The insurance company doesn’t just have to pay on all personal injury cases in order to avoid acting in bad faith. They have a right to investigate the claim, access information pertinent to the claim, and assess its value. They also do not have to initiate settlement negotiations, and the injured party is responsible for proving to the insurance carrier that the insurer owes the money.

What Should You Do if You Think the Insurance Company Has Acted in Bad Faith?

First, a bad faith claim is definitely a type of claim where an injury victim should have attorney representation. Secondly, a demand must be made upon the insurance company to pay a specific amount of money. Documentation of the facts and results of the injury should be presented to the insurance carrier.

Specific Monetary Demand

This is likely the biggest and most critical part of proving a bad faith claim. Presenting a claim to an insurance carrier and requesting that they make an offer does not lead to a claim for bad faith – no matter how they respond. Failure to respond to a request for an offer may violate the insurance statutes, but it likely will not alone constitute bad faith.

In contrast, stating that you are willing to unconditionally accept a settlement offer of $25,000 and sign a reasonable release can create a specific duty for the insurance company.

If the claim is reasonably worth more than $25,000, the coverage applies, and liability on the at-fault party is clear, then the insurance company is likely acting in bad faith. They are doing so by not accepting the demand made by the injured party and by not paying the demanded amount of money in a reasonable period of time.

Where Does that Leave You in Your Potential Bad Faith Insurance Claim?

Well, there is a lot going on in any bad faith insurance claim. Insurance bad faith is something best handled by a bad faith insurance attorney. At Ron Bell, we make every effort to get the insurance company to pay your claim. We give the insurance company every opportunity to act in good faith.

We prepare all of the necessary documents and records to present a claim to the liability insurance company because getting full and fair value for your insurance claim is what is in the client’s best interest in personal injury cases. However, if the insurer fails to act in good faith and denies a valid claim, we are ready to fight for you to get you the compensation you deserve!

The Attorney-Client Relationship is Critical When the Insurance Company Fails to Act in Good Faith

An injured person speaking to a lawyer

During a personal injury case, the attorney-client relationship is critically important. You need an attorney that you can trust, and you need legal representation.

You need an experienced attorney who understands insurance companies’ deceptive practices and bad faith tactics. When Insurance companies act in bad faith, you need an attorney who understands the impact of unreasonable delays and ridiculous requests on your life.

In bad faith insurance cases, you need a lawyer who understands the emotional distress that occurs when the insurance company denies legitimate claims and valid claims brought according to active, applicable insurance policies and contracts.

The insurance contract is supposed to protect you, not give insurance companies a shield to hide behind when they want to avoid paying your claim.

Make sure you hire an attorney who understands what you are going through.

How Do You Make an Insurance Company Evaluate Claims in Good Faith?

Hiring an experienced attorney to handle your personal injury claim is the easiest way to handle your claim properly. Sometimes, unrepresented individuals may not provide the necessary information to evaluate the claim. This can allow the insurance company to hide behind technicalities in delaying payment on your claim or denying the claim altogether.

Other times, an unrepresented individual may provide too much information to the insurance carrier. Some information is not required to be provided to the insurance adjuster. When extra, unnecessary information is provided during the claim, this can affect the outcome of the claim. This also may create confusion and give the insurance carrier another layer of protection when they claim they are not acting in bad faith.

At Ron Bell, we document everything needed for the proper and timely evaluation and settlement of your personal injury claim. If the insurance company acts in bad faith, they won’t be able to hide behind insignificant details. This can increase the likelihood that they actually act in good faith because the claims representative will know they don’t have anything to hide behind when the dust settles.

However, an insurance provider sometimes just won’t do the right thing. You know that most insurance companies aren’t exactly known for acting reasonably and paying claims quickly and efficiently. You should call an experienced attorney to represent you.

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