When you purchased your insurance policy — be it homeowners’ insurance, fire insurance, or automobile insurance — you did so to protect yourself and your loved ones.
The policy is a legal agreement between you and the insurance company that requires the company to act in good faith by investigating claims and paying you what you’re due. However, the gut-wrenching truth is that not all insurance companies act in good faith.
Not all of them recognize their promise and legal responsibility to every client. Sometimes, they attempt to pull a fast one to help keep their profits up, rather than protect you.
That’s when you need to know how to sue an insurance company for bad faith.
What is Bad Faith?
If you’ve read your insurance policy, you should have clear expectations about what your insurance company will do for you and what the policy will cover.
In situations where your insurance company is not being honest, legally fair with you, or it’s failed to fulfill its contractual duties, there is the possibility that you will need to know how to sue an insurance company for bad faith.
Bad faith law exists in the US because there must be a balance between the interests of an insurance company and those of policyholders. On one hand, there is a need for an insurance company to be able to protect itself from fraudulent or invalid claims by rejecting them. On the other hand, policyholders have the right to receive fair compensation based on the terms of their plan.
Bad faith law provides the necessary checks and balances to that system.
Recognize the Signs of Bad Faith Insurance
There are a plethora of signs that you might be dealing with a bad faith insurer. However, just because your insurance company seems to be conducting some of these practices, it doesn’t mean you have a bad faith insurance claim — necessarily.
Some of the most common indicators that your insurance company is acting in bad faith are poor communication, denying your claim without just cause, pressuring you to accept an unfair settlement, or delaying proper payment on your valid claim.
Recognizing these signs is your first step in determining how to sue an insurance company for bad faith.
Pouring on the Poor Communication
If your insurance company stops communicating well once you’ve submitted a claim, there is no guarantee they are acting in bad faith. However, there is a reason to be suspect.
Common breakdowns in communication can include the company failing to acknowledge that it has received documents and evidence concerning your claim. There can also be poor communication about how things are moving along with their investigation.
None of that is okay. In general, communications should be frequent, and the exchange of information relatively easy.
Denying Your Claim Without Proper Cause
There are legal and legitimate reasons that an insurance company might deny your claim. These include damages that exceed or go beyond the scope of your policy.
However, if your insurance company is denying your claim without clearly communicating the proper cause, that should be a big red flag for you. In fact, some companies acting in bad faith deny policyholders’ claims in hopes that the person will just give up.
Pressuring You to Accept an Unfair Settlement
Your insurance company should be working for you. Of course, that’s not always the case.
If your insurer is pressuring you to accept a settlement that seems unfair by telling you it’s the only option, an experienced attorney can help you find an alternative solution. That same attorney might also help you pursue a bad faith claim if it comes to that.
Delaying Proper Payment on Your Valid Claim
Insurance companies acting in bad faith also use the tactic of delaying the process as much as possible. This can often include making wildly unreasonable demands for you to produce excessive amounts of documentation.
This tactic works because when people are desperate — imagine a car accident leaves you unable to work, but you still have bills to pay — they are more willing to accept a lowball offer.
What to Do if Your Insurance Company Is Acting in Bad Faith
Unfortunately, you can’t just launch right into suing your insurance company if you believe it’s acting in bad faith. In fact, you need to know exactly how to sue an insurance company for bad faith to ensure you have the best chance of winning your case.
Know Your Insurance Policy
The first step you need to take is to get a full copy of your contract and read it. In some cases, you might want to even request a copy of the policy before filing your claim — it can let insurers know that you’re not going to be easy to push around.
Document, Document, Document
The next step requires thorough documentation of your actions and the insurer’s actions. The goal here is to prove the validity of your original claim, as well as the fact that your policy should cover it.
To do this, you’ll want to gather all correspondence between you and the company, as well as reports, receipts, photo evidence, and brief notations of all calls with the company. Be sure to include times and what was talked about.
Request Review of Denial
Even with all this evidence in your pocket, you’re not ready to sue. Instead, you should request that a supervisor review your claim and the denial.
If that doesn’t get you anywhere, you’ll want to appeal the denial to your state’s insurance regulatory agency. Though services are different in every state, the agency will often help mediate a disputed claim denial.
File that Bad Faith Insurance Lawsuit
Bad faith lawsuits are not straightforward, as they often include additional claims, such as negligence, breach of contract, and fraud. Given this, you’ll want to present your case to an attorney who is well versed in bad faith insurance claims. The right attorney will help you determine how strong your case is and precisely what you deserve.
At this point, things get interesting, because you will not only be seeking compensation based on what was owed to you via your policy, but you will also be seeking compensation for damages due to the insurance company’s bad faith, which can be magnitudes more.
Final Thoughts: How to Sue an Insurance Company for Bad Faith
It’s hard to believe that some insurance companies are so greedy that they will prey on you when you are most vulnerable. However, that’s the hard truth.
Thankfully, you can protect yourself by learning how to sue an insurance company for bad faith.
By taking the right steps, you’ll be in the position to team up with an attorney and win your case — not only for the money owed to you by your contractual agreement with the insurance company but also for the damages the company has caused through their bad faith.
Laws for bad faith insurance claims vary from state to state. However, if you’re in Colorado and near the Denver area, Manning Law will ensure you receive the payout you deserve. Reach out to our expert law team today.