Bad Faith Lawsuits: When They’re Warranted

by | Dec 7, 2020 | Financial Featured

Insurance companies are famous for being difficult to deal with in many cases. They all generally use a similar policy when evaluating claims regardless of the type of payout it entails. Insurance companies are in business to generate a profit, and almost all of them do generate significant earnings to the point of becoming massive corporations.

This is not a mistake, and the most difficult insurance companies to deal with are often the ones with the highest commercial profile and the most clients. Different types of insurance companies use different policy and claim defenses.

However, all are focused on the same goal of denying or minimizing payouts even from valid policies where total damages could be extensive. This is often accomplished by using tactics that could be considered bad faith in a court of law when all material facts are evaluated. It is important to understand that bad faith insurance claims can stem from any type of claim. Here are a few tips regarding when bad faith tactics could be occurring with an insurance claim.

Delayed and Denied Benefit Payments

Insurance companies commonly respond to a submitted claim, but not always. Claims should typically be paid within 15 days of submission, but there can be extensions in certain states based on claim facts. Insurance companies are required by law to investigate all claims in a timely manner and provide a response regarding coverage.

However, claims can be denied based on technical issues that will require taking a case to court. Denying valid claims is usually a delay tactic to influence the claimant into accepting a lower settlement, which could be determined as bad faith.

Excessive Documentation

Another method of stalling payment of a claim is requesting excessive documentation. One way insurance companies do this is by requesting an additional medical evaluation from “independent” company doctors. This request works as both a stalling tactic and an attempt to generate a defense against the claim.

It is still vital to attend all of these types of appointments or provide any information insurers have requested. Failure to comply with requests will assuredly be a point of contention with the eventual claim settlement or if a case goes to court.

Offering an Excessively Low Settlement

Another form of bad faith can be offering a reduced settlement amount to end a claim. This can happen with a wide variety of claim types. However, it is usually applied in auto accident cases when general damages for ongoing medical issues are a significant element of the claim.

General damages are what all insurance companies want to avoid or reduce as much as possible. Often they will force a claimant to take a case to trial if they think they can win in the end.

False Comparative Negligence Defenses

Comparative negligence is the typical defense when the case is a personal injury issue, and especially if it is the result of an auto accident. Many insurance company claims-agents or attorneys will offer an early low-ball settlement amount. They are even more likely to do this if they think it will stop any representation from an attorney. They then assume a “take-it-or-leave-it” stance, which leaves the claimant with no alternative except filing a lawsuit.

This can be very problematic in states that use modified comparative negligence law, and having an attorney is always best when this defense is possible.

These are just some of the typical tactics insurance companies can use in attempting to lower payouts in claims of any type. Much of their company’s success has come from short-selling claimants who do not retain legal counsel.

Never attempt to handle an insurance claim personally because the claim could be much more valuable than realized. There are laws that govern how insurance claims are handled. An aggressive attorney understands the process involved in making sure you get a fair settlement after a bad faith case.

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