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Insurance Bad Faith Lawyers
Insurance Bad Faith Lawyers
Insurance bad faith is the basis for legal actions against an insurance company that has delayed or failed to pay or defend a reasonable claim. It is based on two sources: common law (i.e. the implied warranty of good faith and fair dealing) and state and/or federal laws that create duties of conduct for insurance providers. The duty arises for every claim involving an insured party. Insurance bad faith applies to transactions in which an insured person works with his or her insurance company directly on a claim, and it applies to situations in which third-parties make claims against the insured that are covered by an insurance policy.
Sources of Insurance Bad faith
1. Common Law
Common law implied warranty of good faith and fair dealings is a primary source. Based on a traditional duty between the insurer and the insured, the common law warranty goes to the purpose of the agreement. The parties have a covenant for the protection of the insured’s interests. The law essentially views the insurance company as a fiduciary, one with a special relationship of trust.
2. State Laws
After some landmark decisions in the California Courts, California and many other states considered uniform unfair claims practices laws. These laws fall into two broad categories, those which actively protect the policy holder and grant rights against insurance companies; and those more conservative which tend to a narrow reading of the insurance company duties.
3. Federal Laws
An excellent example of federal law that applies to the exclusion of all else is the Employee Retirement Income Security Act or ERISA. It covers the field of insurance obligations for group health benefits plans.
Insurance Bad Faith Is a Powerful Tool
A major departure from other nations, the U.S. courts have moved to favor policyholders on the question of coverage. When faced with a mix of covered and potentially non-covered events, the existence of a single covered event triggers the insurance company’s duty to defend, and the insurer must undertake the total defense of its insured. This doctrine is a powerful tilt in the law in favor of the finding of coverage.
Evidence and Instances of Insurance Bad Faith
In first party situations, evidence of bad faith relates to insurance company conduct. Their duty is to act in good faith and according to the terms of the insurance contract. Delays, indifference, and failures to investigate claims are evidence of bad faith.
In third-party situations, the insurance company has a duty to defend the policyholder and to indemnify or hold them harmless up to the limit of the policy. This situation requires prompt action and not delays; it requires action to resolve the issues by settlement within policy limits. The failure of the insurance company to make a reasonable settlement exposes the insured to liability in excess of the policy limits. Instances of insurance bad faith are similar to the below-described actions.
Examples of insurance bad faith include:
- Failing to acknowledge coverage.
- Requesting burdensome amounts of documentation.
- Misleading claimants about critical facts such as the statute of limitations.
- Making unreasonable or un-stated policies for denial of claims.
- Failing to defend a legal action against the insured.
- Coercive or overbearing tactics towards the insured or third-parties.
Seeking Legal Assistance
When faced with a breach of duty by an insurance company, the assistance of an experienced insurance bad faith attorney can be quite valuable. Defining the scope of legal injury in insurance bad faith requires a strong grasp of prevailing case law and relevant interpretations of state laws. There may be a number of sources of bad faith liability in a transaction. Bad faith insurance cases can involve a large number of actors, such as when an insurer denies third-party coverage for a number of claimants.
The law of insurance bad faith is a powerful doctrine and an important set of protections for policyholders. Whether in first-party or third-party situations, the duty of the insurance company is clear: it must act, and it must act effectively. The insurance company must promptly investigate and defend all claims.
Insurance bad faith claims can seek damages for the harms caused by unreasonable delays and denials of insurance coverage. These vary from state to state and include the below-described remedies that can be awarded by judges and juries.
- State law penalties.
- Liability in excess of policy limits.
- State law interest penalties.
- Attorney fees.
- Emotional distress.
- Economic loss has been broadly interpreted. Cases have awarded damages for losses of property, damage to business reputation, and loss of trade or business volume.
- Punitive damages have the potential to dwarf recovery for actual harms as juries can send a message of disapproval to the insurer. Wealthy defendants have been held for punitive damages far in excess of the actual economic losses.
Getting Help with Bad Faith Insurance Claims in Colorado Springs
If you think you qualify for an insurance bad faith case, contact us at Maceau Law. Your first consultation is free and we’ll be able to discuss the details of your case and determine the best path of legal action against oppressive or uncooperative insurance companies and get you what you deserve.