Bad Faith

When making claim determinations some insurance providers will deny claims where the evidence clearly demonstrates that the claim should have been properly paid.  In these instances, the insurance company may be liable for operating in bad faith.  All insurers are required to act in good faith when reviewing a claim for payment of benefits.  In short, an insurance company must fully investigate and consider all of the circumstances surrounding a claim.

If an insurance company denies a claim that it should pay, either knowingly or as a result of inadequate investigation, the insured may be able to pursue a bad faith claim.  Bad faith can even occur when an insured offers to pay less than an adequate amount of compensation for the settlement of a claim.  A successful bad faith claim may allow recovery for benefits owed under the contract, interest, out of pocket expenses, foreseeable and consequential damages, attorney fees and punitive damages.
Some bad faith claim examples include:

  1. Misrepresenting pertinent facts or insurance policy provisions relating to the coverage at issue;
  2. Failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies;
  3. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
  4. Refusing to pay claims without conducting a reasonable investigation based upon all available information;
  5. Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
  6. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
  7. Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
  8. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
  9. Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;
  10. Making claims payments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made;
  11. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
  12. Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
  13. Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;
  14. Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
  15. Using as a basis for cash settlement with a first party automobile insurance claimant an amount which is less than the amount which the insurer would pay if repairs were made unless such amount is agreed to by the insured or provided for by the insurance policy.

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