Watch Out for Unscrupulous Insurers: Understanding Insurance Bad Faith

Suppose you’ve been seriously injured in an accident (e.g., a car accident). The first place you turn for assistance is likely to be your insurance company. After all, you’re a responsible person; you’ve been paying premiums for coverage to deal with a scenario just like this. Unfortunately, insurance companies don’t always see it that way, frequently denying meritorious claims by good customers for less than honest reasons. If this situation sounds familiar to you, you may have been a victim of insurance bad faith, and a Tifton accident attorney can help you fight back.

Insurance Bad Faith Explained

An insurance policy is a contract between the insured (i.e., you) and the insurance company, wherein the insured pays a fee in exchange for the insurance company’s promise to cover specific categories of losses (e.g., personal injury, property damage, claims by third parties, etc.). All contracts — including insurance contracts — include an implied covenant of good faith and fair dealing, which means that the parties warrant that they will implement the agreement as intended and not engage in behavior that would frustrate its purpose. Insurance bad faith occurs when an insurance company breaches its covenant in an attempt to avoid its contractual obligations to its policyholders. 

There are two primary types of insurance bad faith: 

• First-party insurance bad faith: Occurs where the insurer unreasonably refuses to pay benefits to the policyholder
• Third-party insurance bad faith: Occurs where the insurer unreasonably fails to defend or settle a claim by a third party against the policyholder (e.g., premises liability claims against homeowners)

Both types of insurance bad faith can expose policyholders to significant financial liability, either for their own losses or via third-party legal claims against them. 

Common Insurance Bad Faith Tactics

Insurers employ various tactics to attempt to avoid paying meritorious claims. Some of the most common include: 

• Unreasonable delays in processing claims: Insurers may delay processing under the guise of needing more evidence or time to review. Such tactics can often exacerbate the policyholder’s losses. 
• Denial without a valid explanation: Many states require insurers to provide specific reasons for denying a claim. Simply stating “it’s not covered under your policy” without citing the specific exclusion is not enough. 
• Lowball settlement offers: Insurers often offer claimants significantly less than their claim is worth, especially early in the process. In doing so, they rely on claimants’ ignorance of the value of their claim and the assumption that settlement offers are “take it or leave it” situations. 
• Misrepresentation of policy terms: In some cases, insurers may intentionally misstate the policy’s coverages or exclusions, or, at the very least, “creatively” interpret them against the policyholder. 
• Failing to conduct an investigation: Insurers typically conduct investigations into their policyholders’ claims, but these investigations can be time-consuming and costly. In some cases, they may fail to conduct an investigation or conduct a merely perfunctory one in an attempt to quickly deny the claim due to a lack of evidence. 

Our Tifton Accident Attorneys Fight Back Against Insurance Bad Faith

If you believe your claim has been wrongfully denied, you will need an experienced advocate to take on your insurance company. To get started, please contact a Tifton accident attorney at the Hudson Injury Firm by calling 229-396-5848 or using our online form.