Insurance provides a safety net for everyone in times of crisis. They offer financial protection and peace of mind for policyholders. However, not all insurance claims are processed in good faith.
As in many other places, Edmonton policyholders sometimes face unjust treatment from their insurance providers.
This blog post will reveal the top bad-faith insurance practices and how an experienced insurance lawyer Edmonton can help policyholders navigate these issues.
What Exactly is Bad Faith in Insurance?
Bad faith in insurance refers to the unethical practices of an insurance company when handling claims. In simple terms, it means the insurer is not playing fair and is violating the principles of honesty and fairness in the insurance contract.
The Campbell vs. State Farm Mutual Automobile Insurance Case perfectly exemplifies this.
In 2002, Mr. Campbell had a serious car accident where he was found guilty of causing a fatality. The people who sued him (the plaintiffs) offered to settle for $50,000, the limit of his auto insurance. Surprisingly, State Farm, Mr. Campbell’s insurance company, decided not to settle.
Even though their claims adjuster said Mr. Campbell was fully responsible, State Farm took the case to court. They tried to argue that Mr. Campbell was only partly at fault for the accident and the resulting fatality. So, instead of settling, they went to court to dispute who was to blame for the car accident.
Let’s break down what this involves:
- Failure to Investigate
Example: Purposely not looking into a claim or ignoring important details.
- Concealing Contractual Terms
Example: Hiding important details in the insurance policy or not being transparent about coverage.
- Slow-walking Settlements
Example: Unnecessarily delaying the process of settling a claim.
The original concept of “bad faith” comes from the idea that both the insured person (the one with the insurance) and the insurance company should act in “good faith.” This means being honest, not hiding information, and sticking to the agreed-upon terms.
NOT everything an insurance company does is automatically considered bad faith. For example, delays caused by employee oversight or computer errors are generally not considered intentional bad-faith acts.
If a policyholder is unhappy with the amount offered for a claim, but the insurance company genuinely believes it’s fair, it’s not automatically bad faith.
Understanding bad faith helps protect policyholders from unfair treatment and ensures that insurance companies uphold their end of the bargain. If you suspect bad faith practices, seeking legal advice to know your rights and options is essential.
Bad Faith Insurance Practices
One of the telltale signs of bad faith is the intentional delay in processing a claim. Insurance companies must handle claims promptly and efficiently. Any unnecessary delays may cause financial strain on the policyholder, adding stress to an already challenging situation.
|Unreasonable Delay Practices
|Impact on Policyholders
|Extended claim processing times
|Financial strain due to prolonged wait periods
|Frequent requests for additional documentation
|Frustration and emotional distress
|Lack of communication on claim status
|Uncertainty about the future and financial planning
A thorough and fair investigation is necessary to assess an insurance claim’s validity accurately. However, bad faith insurers may cut corners or intentionally overlook key details.
The consequences of incomplete investigations include:
- Overlooking significant evidence
- Failure to interview key witnesses
- Ignoring expert opinions and reports
Denial of Valid Claims
Perhaps one of the most egregious forms of bad faith is the denial of valid claims. This practice occurs when an insurance company rejects a legitimate claim unjustly without proper justification.
|Denial of Valid Claims Practices
|Impact on Policyholders
|Denying claims without adequate investigation
|Financial loss and emotional distress
|Forcing policyholders into lengthy appeals
|Extended periods of uncertainty and financial strain
Failure to Communicate
Effective communication is significant in any business relationship, including the one between an insurance company and its policyholders. When insurers fail to communicate openly and transparently, policyholders suffer the consequences.
Here are some adverse effects of this bad-faith practice:
- Increased anxiety and stress for policyholders
- Difficulty in making informed decisions
- Strained relationship between insurer and policyholder
Misrepresentation involves stating false or misleading information to policyholders regarding their coverage or the claims process. These deceptive doings can lead to severe consequences for policyholders.
|Impact on Policyholders
|Providing incorrect policy details
|Financial losses due to inadequate coverage
|False promises of quick settlements
|Unrealistic expectations and prolonged claim resolution
Lowballing happens when an insurance company offers a settlement amount significantly lower than the claim’s actual value. This tactic is designed to minimize the financial burden on the insurer while leaving policyholders inadequately compensated.
See the following repercussions of lowballing:
- Inadequate compensation for damages
- Financial hardships for policyholders
- Prolonged negotiations and disputes
Breach of Contract
Insurance policies are legal and compact contracts between the insurer and the policyholder. Any deviation from the terms of the contract by the insurance company constitutes a breach of contract.
|Breach of Contract Practices
|Impact on Policyholders
|Failure to fulfill coverage promises
|Financial losses due to a lack of promised protection
|Violation of policy terms and conditions
|Legal grounds for policyholders to seek remedies
Intimidation or Coercion
Some insurers resort to intimidation or coercion tactics to pressure policyholders into accepting unfavourable settlements. Such practices can have severe psychological and financial consequences, including:
- Mental distress for policyholders
- Acceptance of unjust settlements under duress
- Strained relationships between insurer and policyholder
Unfairly Evaluating Damages
A fair assessment of damages is necessary for determining the appropriate compensation amount. However, bad faith insurers may undervalue or overlook certain damages, leaving policyholders with inadequate compensation.
|Unfair Evaluation Practices
|Impact on Policyholders
|Ignoring non-economic damages
|Incomplete compensation for pain and suffering
|Undervaluing property damages
|Financial losses due to inadequate reimbursement
In some instances, policyholders who assert their rights or file complaints against their insurers may face retaliation. This could involve increased premiums, policy cancellations, or other punitive measures.
Here are the potential consequences of retaliation.
- Increased financial burden on policyholders
- Discouragement of legitimate complaints and grievances
- Legal avenues for policyholders to challenge retaliation
Secure Your Rights with an Insurance Lawyer in Edmonton
Are you facing unfair treatment from your insurance company? Learn how experienced insurance lawyers Edmonton can help you navigate bad-faith insurance practices and ensure you receive the compensation you deserve. Don’t let injustice prevail – consult with a legal expert today.
Frequently Asked Questions
If you suspect your insurance company isn’t playing fair, here’s what you can do:
Document your complaint in writing to your claims handler. Support your claims with evidence like past correspondence, statements, or receipts related to your claim.
Reach Out to Authorities
Contact your state department of insurance. Share the details of your complaint. Your case might be investigated, potentially leading to fines if your insurer is found at fault.
Consider consulting a lawyer. A licensed attorney, familiar with your state’s laws, can advise you on potential legal actions, including going to court. Legal options vary by location, so understanding your rights is crucial.
Damages in a bad faith lawsuit may include:
Original Claim Amount
This is the main money you’re supposed to get from your insurance claim. It’s what the insurance policy says they should pay you.
If the insurance company takes too long or unfairly denies your claim, you can ask for extra money called “interest.” This is to compensate for any extra problems or costs their delays caused you.
This is when bad actions by the insurance company lead to other problems. It could be emotional stress, mental pain, or extra money problems caused directly by how the insurance company treated your claim.
If the improper behaviour of the insurance company causes you distress or stress, you can request additional compensation. These damages are referred to as “emotional distress” damages.
These are damages intended to penalize the insurance company for improper behaviour. This measure aims to deter them and others from engaging in similar misconduct.
Engaging in a legal dispute with your insurance company shouldn’t impact your future coverage or rates. Insurers are generally prohibited from retaliatory actions for filing legitimate claims or pursuing legal action for bad faith practices.
Rules stop insurance companies from getting back at you for standing up for your rights. They can’t punish or treat you unfairly because you used your rights, like making a fair claim or taking legal action against bad behaviour.
There are rules in place to keep insurance companies from treating you unfairly. These rules ensure you’re not scared to use your rights or ask for what your insurance policy promises.