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Denial of an insurance claim may be bad faith

On Behalf of | Nov 30, 2018 | Insurance Law

Many people are great believers in insurance and purchase a variety of policies to help ensure total protection. Others begrudgingly take on only the bare minimum as required by law or for some specific contractual agreement. In any case, when a claim needs to be filed, the insured fully expects the company to stand up and pay on the claim. However, many California residents have been dismayed to find out that insurance claims are often denied.

It’s important to realize that an insurance policy is in essence a contract that is interpreted according to the written terms but which also must adhere to some general rules of all contracts. One such general provision legal experts point out is the requirement to act in good faith. This is particularly important in insurance claims because it is the insurer that first determines its own liability to pay on a claim. When a repeated pattern of denials is observed within a particular insurer, a red flag is raised.

The proper action required by an insurance agency will depend on the type of claim filed. For instance, if the claim is for some loss suffered by the insured, the agency must thoroughly investigate the extent and nature of the losses and assess those against the policy’s coverage. If the insured is being sued as the party responsible for a third party’s damages, the insurance agency is required to defend against that claim. A failure to act by the insurer can trigger a bad faith claim.

Complaints can be lodged against a nonresponsive insurance company with the state insurance commissioner. Someone who has fallen victim to a bad faith insurer may want to reach out to an insurance lawyer who can be helpful in explaining rights and legal requirements.