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Understanding insurance bad faith as a policyholder

On Behalf of | Mar 14, 2018 | Insurance Law

In modern-day America, having insurance isn’t merely a luxury. It’s often essential. And certain types of insurance, such as auto insurance, are legally required here in California.

If you’ve ever felt frustrated by or powerless against your insurance company, you’re not alone. Too often, insurers have primary discretion over which claims get covered and for how much money. Appealing or contesting these decisions is an uphill battle. The good news, however, is that you do have rights as a policyholder. And if your insurer fails to uphold the terms of your policy in good faith, you may be entitled to compensation.

When you enter into a contract (policy) with an insurer, you are required to pay premiums, follow the terms of the policy and steer clear of anything resembling insurance fraud. In exchange, the insurer is required to fulfill its responsibilities, which include investigating claims in a timely manner, paying the full value of legitimate claims and defending you against third-party claims related to things covered in your policy.

To put it more simply: your insurer should look for reasons to accept and pay legitimate claims rather than just looking for reasons to reject or underpay them.

What does insurance bad faith look like?

Each insurance policy is different, but here are examples of some actions that might constitute bad faith:

  • Taking too long to investigate and pay a claim
  • Rejecting a seemingly valid claim without providing a reasonable explanation
  • Accusing you of insurance fraud (without strong evidence) in order to avoid paying the claim
  • Suddenly cancelling your insurance policy after you file a claim without providing a legitimate reason to do so
  • Settling your claim for far less money than it is worth
  • Paying only partial benefits

Here in California, victims of insurance bad faith may be entitled to compensation higher than the value of the claim. You may also be able to recover attorneys’ fees, pain and suffering and punitive damages.

Going up against an insurance company is no easy task, but it is often the best way to protect your own interests and to prevent other policyholders from similar mistreatment. If you fear that you have been a victim of insurance bad faith, please seek the help of an experienced insurance law attorney.