Bad Faith Insurance: Definition and Your Rights
When an insurer attempts to avoid their responsibilities to their policyholders, they are acting in bad faith. So, how does it work, and what can you do?
Insurers act in bad faith when they use misdirection or confusion as tools to avoid holding up their end of the insurance contract. Ultimately, misrepresentation of contract language or failure to disclose policy limitations are bad faith practices.
These practices can apply to any type of insurance, from homeowners to health insurance. As long as there is an insurance contract, there is potential for bad faith. A difference of opinion or a simple error is not bad faith, but ignoring a claim or denying evidence can violate the insurance contract.
Common-Law Bad Faith
Some states have specific laws regarding unreasonable conduct from an insurer. Generally, the signs of a bad faith claim are consistent across the board, but some actions are automatically subject to litigation under common law.
If an insurer acts in bad faith under common law, the policyholder must prove the following to hold their insurer accountable:
- The benefits were withheld: The policyholder must prove that the insurer intentionally withheld the benefits listed under the policy terms.
- The insurer's reasoning for withholding benefits was unreasonable: Instead of investigating the claim to determine whether it was valid, the insurer knowingly withheld benefits without reason.
Once the policyholder has evidence to support the two factors listed above, they can file a common law bad faith complaint.
Statutory Bad Faith
Statutory bad faith claims are based on state law. Instead of establishing their case on the insurer's breach of contract, the policyholder can hold the insurer accountable for neglecting state laws that apply to insurer responsibilities.
In Connecticut, policyholders can pursue legal action if the insurer violates the Unfair Insurer Practices Act. Under this law, insurers have a duty of care to uphold the insurance contract and follow an efficient and thorough due process for each claim.
Insurers may be held liable for bad faith in Connecticut if they:
- Fail to provide a reasonable explanation for claim denial within a reasonable amount of time
- Make no attempt to give fair and equitable settlement of claims when liability is clear
- Refuse to pay claims without an investigation
- Fail to implement and uphold fair standards during an investigation
Not only can the insurers act in bad faith by neglecting their duty of care, but they can also be held liable for breaking state laws. If you believe you have a bad faith insurance case, contact an attorney immediately. Never attempt a legal battle without a lawyer.
Put Your Faith in a Team That Cares
Insurers can weasel their way out of fulfilling their side of the contract, but you don't have to settle for bad faith insurance providers. Fitzpatrick Mariano Santos Sousa P.C. can investigate your case and collect compelling evidence to support your claim. We won't stand by while the insurance company neglects its duty of care. Entrust your case to us, and we will hold the insurer accountable on your behalf.