Injured plaintiffs are often victims
of wrongful delaying, withholding, or denying of benefits by either their own or
the injury-causing-party's insurance company known as "bad faith".
Bad faith law requires an
insurer who has acted in bad faith to compensate the policyholder the original
claim's amount, any other losses resulting from the denial of benefits, and, to
deter future wrongful acts, punitive damages.
Types of "Bad Faith"
"First Party" bad
faith regards insurance companies' obligation to their injured policyholders to
settle claims in a reasonable amount of time and for a reasonable amount of
money.
"Third Party" bad
faith regards claims made against the injury-causing-party's policy. For
example, if you're injured in an accident where someone else is clearly at
fault, their insurance company, the Third Party insurer, is responsible for
compensating for your injuries and settling the claim in a reasonable amount of
time and for a reasonable amount of money.
Examples of bad faith include
undue delay in handling claims, inadequate investigation, refusal to defend a
lawsuit, threats against an insured, refusing to make a reasonable settlement
offer, or making unreasonable interpretations of an insurance policy.
Bad Faith Law and Claims
Because it is among the United
States' most powerful and profitable industries, insurance companies wield
significant influence over the federal government which has no bad faith law or
requirements that insurers act in good faith and fairly with their insureds.
Instead, the insurance
industry is regulated by state created bad faith law which deems insurers as
having a "fiduciary relationship" - - a special relationship of trust
and of acting in good faith - - with policyholders and define "bad
faith" as delaying, withholding, or denying policyholder benefits based on
legitimate claims filed under valid insurance policies.
Bad faith laws require insurance
companies to "adjust", i.e.,
deny or pay, a claim within a reasonable period of time, cooperate with
claimants through all dealings, including promptly responding to policyholder inquiries,
and express the exact reason for denying requested benefits by citing the
policy provision upon which that decision relies.
Bad Faith Claims and Recovery
When it wrongfully delays,
withholds, or denies benefits, bad faith law empowers injured policyholders to
seek relief from the insurance company through a tort, or personal injury,
lawsuit.
Bad faith law requires an
insurer who has acted in bad faith to compensate the policyholder both the
original claim's amount and any other losses resulting from the denial of
benefits. Further, to deter future wrongful
acts, bad faith law provides for recovery of punitive damages from insurance
company.
