The problem of insurance bad faith arises from a fundamental conflict of interest between you and your insurance company. It is in the insurance company’s best interest to accept your premiums every month but never pay a claim. It is in your best interest to receive a prompt and full settlement of any claim that arises.
This tension is natural, and a certain amount of friction is inevitable. It is only when the insurance company cheats that a bad faith claim arises.
First-Party Claims vs. Third-Party Claims
When you file a claim against your insurance company, you are filing a first-party claim. Suppose, however, that a negligent driver plowed into your car and injured you.
Since California is an “at-fault” auto insurance state, you can file a claim against the at-fault driver’s auto liability insurance for any bodily injury that you suffered.
In such a case, you would be filing a third-party insurance claim.
Appropriate Reasons to Deny or Reduce the Value of Your Claim
Following is a list of some legitimate reasons why an insurance company might deny or minimize your claim:
- You allowed your insurance coverage to lapse through failure to pay premiums.
- You were breaking the law at the time of the accident. Sometimes this matters and sometimes it doesn’t.
- The accident was partly your fault. This will result in a partial reduction of your recovery.
- You missed the statute of limitations deadline to file a lawsuit.
- Your claim arguably falls within a policy coverage exclusion. If your claim is arguable..you can be sure the insurance company will argue it.
- You fail to provide evidence to back up your claim.
- Your injury actually predated the accident for which you are claiming coverage.
There are many more possible reasons why an insurance company might be justified in denying or minimizing your claim.
Possible Examples of Insurance Company Bad Faith
The following actions should raise a red flag to alert you that the insurance company might be dealing with you in bad faith:
- Issuing a woefully inadequate “lowball” settlement offer while you are still recovering in the hospital.
- Attempting to intimidate you.
- Advising you that you don’t need a lawyer.
- Attempting to get you to sign documents that the insurance company knows you don’t understand
- Second-guessing your doctor’s judgment on whether a particular medical treatment was necessary.
- Delaying settlement hoping that you will miss the statute of limitations deadline.
- Misrepresenting facts as a tactic to deny your claim (For example, they may falsely say “your homeowner’s insurance policy doesn’t cover dog bites.”).
- Misrepresenting policy limits.
- Forcing you to file a lawsuit by refusing to settle even when liability is clear.
- Failure to offer justification when they deny your claim.
They may also:
- Ask trick questions and use your answers against you. (For example, the insurance adjuster might insist on knowing the exact minute that a car accident occurred. But if you tell them, they may try to accuse you of causing the accident by checking the time instead of watching the road).
- Use false pretenses to gain access to your social media accounts and then distort the contents to question the seriousness of your injuries.
There are hundreds of other insurance company tactics that might suggest bad faith dealing. When in doubt, consult with a lawyer.
Remedies for Bad Faith
If you win your bad faith claim, you might be entitled to the following remedies:
- The value of the claim that the insurance company would have paid but for its bad faith tactics (plus interest);
- Consequential damages;
- Emotional distress damages;
- Attorney’s fees (since you wouldn’t have had to file a lawsuit if the insurance company hadn’t acted in bad faith); and
- Punitive damages; in certain cases where the insurance company’s actions were outrageous.
Other remedies might be available as well, depending on the facts and circumstances of your individual case.
How to File a Bad Faith Claim
Take the following steps:
- Collect all relevant documentation (medical records, correspondence with the insurance company, etc.).
- Closely examine the wording of your policy.
- Appeal your denial with the insurance company.
- If the insurance company denies your appeal, send them a demand letter (?). Consult with your attorney first, because sometimes this is not a good idea).
- File a complaint with the California Department of Insurance. This won’t resolve your claim, but it can generate evidence in your favor.
- File a bad-faith lawsuit against the insurance company.
Your lawyer can help you negotiate an out-of-court settlement.
A Personal Injury Lawyer Can Make All the Difference
Even if your insurance company has engaged in some of the ethically questionable tactics listed above, you may or may not have a viable “bad faith” claim. A personal injury lawyer can gather evidence, apply it to California law and the relevant policy language, and create a persuasive argument that might enrich you with no need to even step into a courtroom.
Contact or call M&Y Personal Injury Lawyers today at (877) 300-4535 for help with your bad faith claim.