When Is an Insurance Company Liable for Bad Faith? 

Personal Injury Lawyer

Bad faith refers to an intentional or dishonest act where legal obligations are unfulfilled. An insurance policy is a written contract between a policyholder and the insurance company. In order to uphold the contract, both parties must act fairly and in good faith. When the insured files a claim with their insurance company, the insurer has a contractual and legal obligation to handle the claim in a fair, reasonable, and timely manner. In situations where a victim is injured, an attorney represents them in order to receive compensation for damages incurred due to the accident. The insurance company will often settle the claim in order to avoid taking the lawsuit to trial. 

During a settlement, the insurance company agrees to pay a certain amount to the victim. In turn, the victim accepts the offer and promises not to pursue further compensation in the future. If the victim and the insurance company are not able to agree and settle the claim, the case will go to trial in front of a judge and jury.

Bad Faith Claims

In Florida, the bad faith law protects victims in situations where the insurer fails to handle the claim fairly. As a result, the victim is able to still receive compensation for damages incurred, even if the insurer did not agree to make compensation. This includes all types of insurance policies such as homeowners, automobile, life, and health policies.

Bad faith insurance claims can be made against the insurer if the insurance company fails to act fairly and in good faith. Some examples of bad faith include situations where the insurance company engages in the following conduct:

  • Denies a claim for no reason
  • Denies a claim without sufficient or satisfactory reasoning
  • Undervalues a claim
  • Delays a claim
  • Does not communicate with you in a timely and transparent manner
  • Fails to settle a claim when they should have done so
  • Does not investigate your claim properly or adequately
  • Misrepresents a claim in order to reduce the cost of the claim
  • Fails to defend the insured from a liability lawsuit
  • Attempts to change or cancel the policy after the claim has been made
  • Requests unreasonable or irrelevant documents in order to delay or deny the claim
  • Threatens or scares you in order to deter you from making a claim

Just because an insurance claim is denied does not make it a bad faith claim. Insurance policies are long and comprehensive documents with many exclusions. Some policies do not cover certain damages or have many exceptions and rules to protect insurance companies. The average person may have a difficult time interpreting these complicated documents, so it may be wise to contact an attorney or insurance expert in order to review your policy and specific case.

Bad Faith Settlements

If you file a bad faith claim against your insurance company, you are able to seek compensation for the initial amount as well as additional damages. The settlement amount will depend on a few different factors including the details of your specific case, as well as the history and reputation of the insurance company. The settlement of a bad faith insurance claim can often be even more than the amount that would have been paid if the claim was settled correctly in the first place. The amount is usually higher for a bad faith settlement due to punitive damages. The purpose of this is to deter insurance companies from mishandling claims and acting unfairly in the first place. This protects the insured and holds insurance companies accountable to act fairly and in good faith.

If you believe you have not been treated honestly and fairly by an insurance company, contact a lawyer, like a personal injury lawyer from Jeff Murphy Law, to set up a consultation today.