Do I Have a Bad Faith insurance Claim Against My Insurance Provider?

person handling a claim book to a client

In the event that your insurance provider fails to reasonably act when investigating, processing, or paying out your insurance claim, you might be able to file a bad faith insurance claim with the help of a lawyer. The context of bad faith is defined by state laws, which differ from one state to another. You can file a lawsuit under common law as determined by courts or a claim on the basis of a state statute violation. But what really constitutes bad faith in insurance claims?

Bad Faith Elements Under Common Law

Bad faith elements under common law vary widely from one state to another. Some states characterize bad faith as behavior that lacks proper cause or is unreasonable, while other states have a narrower stance. The problem is that establishing liability only when a claim has been denied isn’t relatively debatable, and insurance providers can take advantage of this. What’s more, some states see bad faith as a tort.

When a Bad Faith Insurance Claim Is a Tort

According to common law, insurance providers have a “good faith” duty to their policyholders. This means that all their dealings should be fair and in good faith. Thus, to prove a common law bad faith insurance claim, you need to prove the following elements:

  • Your insurance provider withheld your benefits. You need to establish the validity of your claim and provide clear documentation that your insurance provider denied your claim in bad faith.
  • Your insurer unreasonably withheld your benefits. Whether or not your insurer’s actions were reasonable will be assessed objectively according to the facts and circumstances as they occurred during that time.

Courts Also Identify Specific Conduct as Bad Faith

For instance, if you’re filing a bad faith insurance claim in Los Angeles, any attorney will tell you that there are certain factors, as outlined in the California Insurance Code, that will be taken into account when deciding if your insurer acted unreasonably. However, while the presence of these factors won’t be considered conclusive proof of bad faith conduct, they can help establish or solidify your claim:

  • Not acknowledging your claim and not acting promptly after they received your claim;
  • Misrepresenting the relevant provisions and facts of your insurance policy;
  • Not adopting and implementing reasonable standards when they processed and investigated your claim;
  • Not giving you a reasonable explanation when they denied your claim; or
  • Failure to deny or approve your insurance claim within a reasonable amount of time after they have presented proof of loss.

Statutory Bad Faith Insurance Claim

claim form and a fountain pen

A statutory bad faith insurance claim is basically founded on a statute implemented by your state’s legislature. Plenty of states have specific rules for protecting insurance policyholders from the deceptive or unfair practices of insurance providers. Generally speaking, these statutes focus on particular actions that are prohibited as well as possible remedies to policyholders.

As you can see from above, there are many different tactics insurance providers use which can be considered bad faith. However, the laws on bad faith differ widely from state to state. With this in mind, if you truly believe that you have a bad faith insurance claim on your hands, talk to an attorney with ample experience in bad faith claims to help you out.

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