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What Are Bad Faith Claims? Your Guide to Understanding The Basics

What Are Bad Faith Claims? Your Guide to Understanding The Basics

Insurance companies play a powerful role in personal injury cases. They control the claims process, the settlement decision, and the timing of payments. And while the majority of claims are resolved without issue, other legitimate claims are purposely delayed, denied without payment, or settled for an unreasonably low amount. Commonly known as bad faith insurance tactics, these unjustified actions leave policyholders unable to pay for medical care and damages. Policyholders who find themselves in this unfortunate situation should consider filing a bad faith claim against the insurance provider.

What constitutes bad faith in the insurance world?

Before diving into the best ways to overcome a bad faith claim, it’s helpful to understand what “bad faith” means in the insurance world. In a nutshell, bad faith is used to describe an insurance company’s attempts to avoid following through on its obligation to investigate and pay a legitimate claim held by a policyholder.

It is important to understand that not every denied claim is one that illustrates bad faith. Some cases are rightfully denied because your insurance coverage lapsed or your policy has specific limitations. It is always wise to carefully review your policy before filing a bad faith claim. Ideally, it’s a good idea to seek the guidance of a lawyer who can lend clarity to any complex fine print or legal jargon.

What types of situations may warrant bad faith claims?

Rather than referring to a single situation, bad faith is used to refer to any one of a set of practices undertaken by an insurance company to knowingly delay or refrain from delivering compensation. Here are some examples of some practices that constitute bad faith in the insurance world:

  • Intentional delays in processing or handling claims
  • Insufficient investigation of a claim
  • Intimidation tactics against an insured person
  • Underpayment of a claim
  • Efforts to try to make the claim process as challenging as possible for you
  • Refusal to remit any payment

Why do insurance companies sometimes resort to bad faith practices?

Insurance contracts feature an implied covenant of good faith. For the most part, insurance companies operate according to this covenant. However, there are isolated circumstances in which companies ignore this implied duty. Reasons why insurers resort to bad faith practices include the following:

  • A desire to avoid paying out money
  • A focus on satisfying shareholders
  • A tendency to ignore claims and focus exclusively on securing new policies

Will filing a complaint help your bad faith claim?

“The Consumer Protection Division reviews insurance practices and complaints in Texas for possible violations of the Texas Deceptive Trade Practices – Consumer Protection Act or Chapter 541 of the Texas Insurance Code. In the appropriate case, our Division has the right to sue in the name of the State of Texas.” – Ken Paxton, Attorney General of Texas

The Texas Attorney General encourages residents who have a bad experience with an insurance company to file a complaint with the Office of the Attorney General’s Consumer Protection Division. The Texas Department of Insurance can also provide help if you have questions, complaints, or problems.

While complaint filings are encouraged, the Texas Attorney General’s website states that they are “prohibited by law from being your attorney or advising you about your specific situation.” So while filing a complaint may help shed light on an insurance company’s unethical practices, it is no substitute for filing an official bad faith insurance claim and aggressively pursuing your insurance company for the compensation you deserve.

What is the best way to handle a bad faith claim?

Handling a bad faith claim on your own can lead to delays, frustration, and disappointing results. At times, it may seem like the more you follow up on your claim, the more discouraged you feel.

The key to handling a bad faith claim is to contact a lawyer as soon as possible. An experienced lawyer will highlight the urgency of your claim and hold your insurance company accountable for your compensation. Here are some specific ways a lawyer can help you succeed with your bad faith claim:

  • Review your contract in detail: Your lawyer will sit down with you and review your policy line by line to assess the extent of the violation.
  • Collect and organize evidence: A lawyer will collect and organize paperwork, receipts, and photos to prove your claim is legitimate.
  • Help you file your claim: Experienced lawyers know insurance companies operate and how to ensure your claim is comprehensive.
  • File a bad-faith lawsuit: Sometimes a lawsuit is necessary to ensure that you receive the benefits to which you are entitled.
  • Put a stop to intimidation tactics: A lawyer will communicate with your insurance company so you don’t have to endure any intimidation tactics.

If you feel that an insurance company has denied your legitimate claim without sufficient reason, reach out to a lawyer right away. With a trusted bad faith insurance lawyer advocating for your rights, you will increase the chances that you receive the compensation you deserve.

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