When insurance companies deny, delay or underpay injury claims without a reasonable basis, they’ve acted in bad faith. In this instance, the insured person can file a bad faith claim against the insurer, suing for additional damages on top of the original injury claim.
Since the policy you purchased constituted a promise by the insurer to provide you with insurance protection, the insurer has a duty to provide such protection and to negotiate and settle your claim in good faith. If it fails to keep this promise, the insurance company has acted in bad faith.
Bad faith, in a legal sense, can be demonstrated in several ways.
For one thing, it must be shown that the insurance company failed to investigate thoroughly before denying a claim, or that it ignored or missed obvious elements which would validate the claim.
This can be due to simple negligence or it can be due to a willful, deliberate ploy to avoid paying the claim. The insurer’s making an innocent mistake may not be enough to establish a bad faith claim.
The insurer may have failed to respond to an injury claim within a reasonable time after receiving the claim. Or the insurer may have tried to settle a claim based on a policy which was changed without the insured person’s knowledge or consent.
The insurer also may have used demeaning, intrusive or harassing investigative measures when processing the claim, or it may have used fraudulent and illegal methods of investigating the claim.
Lastly, the insurance company may have demanded overly burdensome documentation of a claim — documentation which was not required by the policy but was insisted upon in order to delay or deny the claim.
As for what damages are recoverable in a bad faith claim, the claimant can receive what the insurer should have paid for the initial claim, plus additional damages for the insurer acting in bad faith.
These extra bad faith damages include “consequential” damages occurring due to the bad faith denial, such as legal costs for a car accident injury lawsuit brought by the covered driver, and legal costs to sue the insurer in order to prove bad faith.
Claimants also may be able to recover damages for their emotional distress due to the claim’s denial. These are not quantifiable like court costs, but they are very real damages which can be assessed by a court.
Other potential recoverable damages for bad faith include punitive damages if it can be proven that the insurer recklessly or deliberately acted in bad faith to harm the insured person holding its policy. Punitive damages would not be awarded for mere sloppiness or innocent mistakes, but only for willful and harmful denial despite a clear basis for awarding the claim.
Section 541.060 of the Texas Insurance Code specifies practices that would constitute an “unfair or deceptive act or practice.” These include:
• Failing within a reasonable time to affirm or deny coverage
• Misrepresenting a material fact or policy provision to a claimant
• Delaying or refusing a claim’s settlement only because there’s no other insurance than a Texas personal auto policy
• Failing to give a policyholder a reasonable explanation for denying a claim or failing to offer a compromise settlement.
If such failures are established in court, the insurer may be compelled to pay — along with actual damages — attorneys’ fees, court costs and “any other relief the court determines as proper.” Additionally, if it is established that the insurance company knowingly committed one or more of these violations, triple damages may be awarded.
Bad faith denial of claims, which is illegal, is punishable by substantial fines and punitive damages which can be many thousands of dollars.
As for how to file a bad faith claim, the claimant first should get the insurance company’s reasons for denying the claim in writing. Then the injured person should seek legal counsel to navigate the waters of filing a bad faith lawsuit against the insurer.
Keep in mind that insurance adjusters are trained to delay, deny or minimize claims, in order to save money for their employers: the insurance companies. It could be argued that insurance companies routinely act in bad faith. Even so, such bad faith must be demonstrated clearly by evidence in order to hold the insurer accountable.
If you believe you’ve been treated in bad faith by your insurance company, notify the injury attorneys at Jim Adler & Associates today. We’ll promptly provide you with a free legal consultation for your case.