What are Bad Faith Insurance Claims?

Purchasing insurance can feel like a waste of money, right up until the time you need to file a claim. When you take out an insurance policy you are paying your insurer to assume the cost of any potential loss you might suffer. If you don’t encounter any loss, it can feel like you’ve been on the losing side of a bet, but the real loss comes when you’ve purchased insurance and your insurer denies your claim. When that happens, and you feel that the basis for their denial is inappropriate, you may have grounds to file a bad faith insurance claim.

Bad faith insurance claims represent a breach of your insurance policy, which is a contract between you and your insurer. Insurance companies act in bad faith when they act deceptively, deliberately misinterpret the terms of their own policy, unreasonably delay their response to or payment of a claim, or in some other way make it inappropriately difficult or impossible for the insured to be paid the monies that they are owed. To determine whether your insurance company’s response to your claim is appropriate, start by reviewing your contract to make sure your policy was in effect at the time of your loss and that the claim you submitted was covered.

One of the most important elements of a successful bad faith insurance claim is good record keeping. Policyholders need to keep track of every conversation and correspondence they have with their insurer, starting when you file your claim. Write down names, dates, and notes of each interaction so if your claim is denied you’ll have a solid starting point.

If your claim is denied, contact the company and ask to speak to a supervisor. Request a review of the denial, again documenting all interactions, names, and dates. If the supervisor refuses or your denial is not reversed, you have a few options. You can appeal the decision to your state’s insurance regulatory agency. You can also attempt to settle your claim by sending in a written demand letter. Make sure your letter notes that you intend to pursue a bad faith insurance claim if they don’t pay, and send the letter using return receipt. You need to give your insurer adequate time to respond: depending on where you live, they generally have between 15 and 60 days to pay your claim.

A bad faith insurance claim cannot be filed until the insurer has had time to respond to your demand letter, but if they ignore it or you believe your case has been mishandled, you can initiate a bad faith lawsuit. Doing so requires the assistance of an experienced attorney, who can help you identify the appropriate venue and navigate the process. So, contact our offices today for help.