Dealing with the aftermath of an accident, especially when recovering from serious injury, can be extremely distressing. Beyond the physical pain and emotional trauma, there’s the daunting task of navigating the insurance claims process. Most people assume that their insurance companies will act as reliable partners in their recovery. Unfortunately, this isn’t always the case. At times, insurance companies prioritize their bottom line over policyholder rights, engaging in practices that constitute bad faith claims.
Understanding what a bad faith claim is, how to identify it, and the steps you should take in any such scenario is crucial for anyone dealing with a personal injury. This extensive guide will delve into the intricacies of insurance bad faith in the context of personal injury, empowering you with the knowledge you need to protect your rights.
What Is a Bad Faith Claim in Personal Injury?
At its core, a bad faith claim arises when an insurance company fails to uphold its duties toward its policyholder in an honest, fair, and reasonable manner. This isn’t just about an unsatisfactory outcome or a low settlement offer; it’s about a deliberate or reckless disregard toward a policyholder’s interests.
Keep in mind that insurance companies owe a fundamental duty of good faith and fair dealing to the people they insure. When they breach this duty, it is possible to hold them liable for bad faith insurance practices. Whether it’s a bad faith auto insurance claim, a bad faith homeowner’s insurance claim, or a bad faith uninsured motorist claim, the principles remain consistent.
This concept applies to first-party claims (where you, as a policyholder, are filing a claim against your insurance provider) as well as third-party claims (where an injured party is seeking compensation from another person’s insurance provider). While the legal nuances may differ from case to case, the underlying principle is that insurance companies must act fairly.
Examples of Bad Faith Insurance Claims in Personal Injury
While bad faith claims in personal injury cases can manifest in different ways, it’s important to distinguish between a tough negotiation and genuine bad faith. Here are some common examples of insurance companies acting in bad faith.
Unreasonable Delay in Investigation or Payment
One of the most frustrating experiences can be an unreasonable delay in processing a personal injury claim. An insurance company might drag its feet in investigating your claim, requesting endless paperwork, or taking a lot of amount of time to make a decision. This can be a tactic to wear down claimants, forcing them to accept a lower settlement out of desperation. Delaying payment of approved claims also falls under this category.
Denied Claims
This is perhaps the most direct form of bad faith insurance. Insurance companies might deny personal injury claims in bad faith without a reasonable basis, ignoring clear evidence of liability and damages. They might invent dubious reasons for denial or misinterpret policy language.
Lowball Settlement Offers
While initial offers are often low, a lowball settlement offer in bad faith goes beyond aggressive negotiation. This happens when an insurance provider offers a settlement amount that it knows is substantially less than a claim’s true value, even when the evidence overwhelmingly supports a higher amount. Insurance companies can couple this with threats to litigate if claimants don’t accept their offers quickly.
Failure to Investigate Adequately
Insurance companies have a duty to conduct a thorough and impartial investigation into all claims. If they fail to gather relevant evidence, ignore medical records, or dismiss witness statements without proper review, it could constitute a failure to investigate a personal injury claim in bad faith.
Misrepresentation of Insurance Policy Terms
An insurance company might intentionally misrepresent policy terms or exclusions to deny coverage or reduce payouts. This could involve claiming that a policy does not cover certain damages, whereas it actually does.
Refusal to Defend or Settle
In a third-party claim, if someone is filing a claim against you, your insurance company has a duty to defend you by providing legal representation, and to settle within policy limits, especially if there’s a reasonable chance of a judgment exceeding those limits. A refusal to defend policyholder rights or a failure to settle a claim when there’s an opportunity to do so, leading to an excess judgment against someone an insurance company has insured, can be a clear case of bad faith.
Threatening or Coercive Tactics
Insurance adjusters might employ threatening language to pressure claimants into accepting low settlements or dropping their claims entirely. This includes intimidation, implying legal action will be futile, or suggesting that pursuing a claim will ruin your financial future.
Underpaying
Some insurance companies are in the habit of underpaying personal injury claims, forcing claimants to accept less than they deserve for their medical bills, loss of earnings, and pain and suffering.
Demanding Excessive or Unnecessary Information
While insurance providers need information, continually requesting irrelevant or redundant documents, or demanding that you provide information they already possess, can be a tactic to prolong the process and deter you.
Why Do Insurance Companies Act in Bad Faith?
The primary motivation for insurance companies acting in bad faith is, more often than not, financial. By delaying, denying, or underpaying claims, they save money. The driving force can come in the form of internal metrics, pressure to meet targets, or a corporate culture that prioritizes minimizing payouts. It’s a calculated risk some companies take, hoping that claimants will either give up or accept significantly less than their claims’ worth.
The Consequences of Bad Faith
The consequences of bad faith insurance for policyholders can be devastating. In addition to the initial injury, victims face added stress, financial hardship, and prolonged suffering. When an insurance company delays or denies legitimate claims, it can result in:
- Inability to pay for essential medical treatment.
- Loss of income due to extended time off work.
- Accumulation of medical debt.
- Emotional distress and anxiety due to financial strain and the feeling of betrayal by one’s own insurance provider.
- Inability to cover daily living expenses.
Fortunately, the law provides avenues for recourse. If successful, damages for bad faith personal injury claims can be significant. They can include:
- Policy benefits. The full amount of the original claim that you should have received.
- Consequential damages. Financial losses incurred as a direct result of an insurance company’s bad faith, such as lost wages due to delayed treatment, or interest on unpaid medical bills.
- Emotional distress. Compensation for the emotional distress that an insurance company causes.
- Attorney fees. In many jurisdictions, if you can prove bad faith, your insurance provider may be compelled to pay your attorney’s fees.
- Punitive damages. In case an insurance company’s conduct is malicious, oppressive, or fraudulent, a court may award punitive damages. The intention of awarding these damages is not to compensate victims but to punish insurance companies and deter similar conduct in the future.
Steps to Take for Bad Faith Claims
If you suspect your insurance company is acting in bad faith, you must take proactive steps to protect your rights. This is what you need to do.
- Document everything. Maintain meticulous records of all communications with the insurance company. This includes dates, times, names of adjusters, summaries of conversations, as well as copies of all letters, emails, and forms sent or received. This documentation can prove to be vital evidence if you need to sue your insurance company for bad faith.
- Understand your policy. Carefully review your insurance policy to understand your coverage, limits, and the conditions under which your insurance provider must make payouts. Knowing policyholder rights is your first line of defense.
- Be patient, but firm. While delays are common, be aware of what constitutes an unreasonable delay. Follow up regularly, and always do so in writing.
- Gather all supporting evidence. Continue to collect all relevant medical records, bills, police reports, expert witness testimonies, and any other evidence that supports your personal injury claim. Provide these to your insurance company promptly.
- Seek legal counsel immediately. The most critical step is hiring a bad faith personal injury lawyer. This is because attempting to navigate a bad faith claim alone against a powerful insurance company is incredibly challenging, and you should ideally have the best legal help you can find by your side.
- Send a demand letter. Before filing a lawsuit, your lawyer will typically send a comprehensive demand letter outlining your claim, the evidence, and a reasonable settlement amount. This formal step can sometimes prompt an insurance company to reconsider.
If you experience any warning signs like unexplained delays, a denied personal claim, an unusually low offer, or a feeling that your insurance provider is not acting in good faith, it’s time to seek legal assistance. Remember that you should not wait until you’re completely exhausted or desperate, and the sooner you involve legal counsel, the better your chances of a favorable outcome.
Why Hire a Bad Faith Personal Injury Lawyer
Understanding bad faith in personal injury cases requires knowing how different aspects of the law work. Hiring a bad faith personal injury lawyer is ideal because your lawyer can help you navigate the process with minimal effort from your end. An experienced lawyer can:
- Evaluate your case. Determine if your situation truly constitutes a bad faith claim.
- Interpret complex laws. Understand the specific legal definition of bad faith in personal injury in your jurisdiction and how it applies to your situation.
- Communicate with the insurance provider. Handle all correspondence and negotiations, and ensure protecting your rights.
- Gather evidence. Conduct an investigation, depose adjusters, and uncover internal insurer documents that might reveal bad faith practices.
- Litigate on your behalf. If necessary, your lawyer will file a bad faith lawsuit and represent you in court.
- Advise on statute of limitations. Be aware of the statute of limitations that applies to bad faith insurance, which dictates the timeframe within which you must file a lawsuit.
The Broader Picture: Protecting Injured Victim Rights
The fight against bad faith insurance practices is not just about one individual’s claim; it’s about upholding the integrity of the insurance ecosystem and protecting the rights of injured victims. Insurance companies have a contractual and legal obligation to act in the best interests of their policyholders. When they fail to do so, the legal system provides a mechanism to hold them accountable.
Conclusion
Experiencing a personal injury is traumatic enough without the added burden of an insurance company acting in bad faith. While the world of personal injury and insurance disputes can be complex, understanding policyholder rights and recognizing the signs of bad faith are powerful tools.
Remember that you do not have to face an uncooperative or hostile insurance company alone. By taking swift action and enlisting the help of a qualified bad faith personal injury lawyer, you can ensure that your insurance provider honors your claim. After all, it should meet your commitment to paying premiums with good faith, and if not, it warrants a fight for what you rightfully deserve.