What is insurance bad faith?
What does insurance bad faith refer to? Insurance is a form of protection. The purpose of insurance is to protect your financial well-being in the event of an unexpected loss.
Insurance is a contract that you enter into. When you agree to the terms of an insurance policy, a contract is created between you (the insured) and the insurance company (the insurer). In return for payments that you make, which are referred to as premiums, the insurer agrees to pay you a sum of money if a specific event takes place.
So, you buy insurance to give you peace of mind should a loss take place and to protect you and your family from unforeseen events. You faithfully pay your insurance premiums. When some kind of a loss does occur, you expect your insurance company to uphold its part of the contract, which is to pay your claim.
Covenant of good faith regarding insurance companies
Although you may not be aware of it, every insurance contract contains what is known as an "implied covenant of good faith and fair dealing." This covenant of good faith is a duty that neither party of the contract will do anything to injure the right of the other to receive the benefits of the contract agreement.
What if your insurance company does not honor and fulfill its contractual obligations? What if your insurance company does not act in good faith?
When this happens, your insurance company is probably guilty of what is known as bad faith. Insurance bad faith is defined as an "intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others."
Equal consideration from Insurance Company
Insurance bad faith is when your insurance company does not treat you fairly. It is the responsibility of your insurance company to give equal consideration to your interests as well as its own. Insurance bad faith is when your insurance company puts its interests ahead of your interests.
In other words, when you make a valid claim, your insurance company is not allowed to unreasonably underpay your claim, unreasonably deny your claim or unreasonably delay payment of your claim. In doing so, your insurance company may be guilty of insurance bad faith and owe you substantially more than the coverage which is stated in the insurance policy. In addition, your insurance company may now have to pay you for the inconvenience and hurt that it caused you by delaying or denying the payment that you were entitled to according to the terms of the insurance policy.
You are permitted to sue your insurance company with both a tort claim of bad faith and breach of contract when it is guilty of insurance bad faith. A tort claim of insurance bad faith may include emotional distress, foreseeable financial losses and attorney's fees for compelling your insurance company to pay its contractual obligations. You may also be entitled to recover punitive damages if it is determined that your insurance company acted with fraud, malice or oppression. Punitive damages are damages that are for the purpose of punishing the insurance company.
If you believe that you have been a victim of insurance bad faith, you should get in contact with a personal injury attorney.