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Bad Faith Insurance: What constitutes bad faith insurance in California

Insurance agreements are contracts that obligate the insured to pay premiums in exchange for compensation on legitimate claims that the insurer promises.

The contract also implies that both parties deal in good faith and fair dealing, meaning they will treat each other honestly and not deny the other party the benefits as agreed upon in the contract.

Lawsuits on bad faith insurance occur when the insured claims that the insurer unfairly denied them their compensations as agreed, through deceit or technicalities. Here are four that your insurer may have acted in bad faith:

Failure to Investigate

The insurer has the duty to investigate the insured’s claim thoroughly before denying it. The investigation requires them to examine the insured’s documents like proof of loss statement, medical records, proof of damages, and other documents.

For instance, if a representative from the insurance company denies the disability claim based solely on their interpretation of the insured’s medical records without having an expert examine it, the holder can assert that they failed to perform a full investigation.

If you are under the impression that your insurance company has not examined all the facts of your claim (not asking for/refusing to accept further documentation, ignoring important aspects of your claim, etc), then this can be grounds for bad faith.

Failure to Indemnify

Indemnification is defined as obligating one party, the insurer, to compensate the other party for certain liabilities and losses. If the insurer fails to fulfill this duty, then it can constitute bad faith.

The insurance company could be delaying the indemnification process by either asking for documents that seem unnecessary for the insured’s claim or unreasonably prolonging the process that will inevitably lead to the claim’s denial. Many insurance claims are typically resolved within 30 days, although this may vary depending on how complex your case is.

If your claim is taking significantly longer than this, and the insurance company’s explanation for the delay is insufficient this can also be considered bad faith.

Failure to Defend

The duty to defend is the insurer’s responsibility to defend the insured from claims made against them. For instance, the insured was legally accused by a third party, the insurer then has the duty to hire a lawyer and pay for their services to defend the insured.

Suppose the insurance company denies coverage and refuses to defend the other party. In that case, the policyholder can request a declaratory judgment that asks the court to review the policy and claims to see if the company must defend the insured.

The Law Protects You from Bad Faith Insurance

The state of California has enacted Fair Claims Settlement Practices Regulations to protect policyholders from bad faith practices. The Act mandates that claims be handled with fairness and clear communication between the two parties.

The law may have varying models from each state, but its main purpose is to protect the insured from unjust behavior by the insurers during the claims process. Some laws will also order the insurer acting in bad faith to compensate more than the owed amount for unjustly denying a claim.

Punitive damages may also be awarded to the policyholder when the insurer’s compensation was deemed insufficient by the court. It was made to punish the insurer for bad faith and discourage them from repeating the practice.

A Reliable Bad Faith Legal Counsel

Consulting with lawyers with experience in handling bad faith insurance claims will also help strengthen your claim and protect you from further denial. Haffner Law offers free consultations for people seeking legal advice about bad faith insurance.

Visit our bad faith insurance services page to know more about how we can help you get your payout claims. Book a consultation with us to find out how you can get compensation from your bad faith insurance claim.

 

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