Insurance Company Bad Faith: What Is It?

In a typical personal injury case, there may be a lot of insurance companies that you may be dealing with. Multiple insurance companies, when you consider car insurance, health insurance, uninsured motorist insurance or other sources—both yours, as well as dealing with the other side’s (the Defendant’s) insurance company.

You probably already know that insurance companies operate on a simple principle: bring in more money in premiums, than they pay out in claims. That means that they will fight, scratch and do everything possible, to not pay, or pay as little as possible, on any claim or lawsuit that they possibly can.

But sometimes, they cross the line.

Insurance Company Bad Faith

In the fight to not pay a claim, or defend a claim, or make a claimant go away, many insurance companies resort to what is known as bad faith insurance practices.

An insurance company has the right to investigate claims. To asset defenses. To make a reasoned evaluation of a claim, value the claim, and make offers, even if those offers are not what the insured or the claimant wants them to be.

But they do not have the right to play games, stall, hassle claimants, or make people jump through hoops. That’s called bad faith.

What is Bad Faith?

There are tactics that any insurance companies engage in that constitute bad faith. Some examples may be:

• Waiting too long to pay claims, or to evaluate claims-longer than the company should reasonably need, to ascertain the value of the claim.
• Requiring documentation of claims, that is above and beyond what is reasonably needed, or which is far in excess to the information that they already have.
• Asserting baseless defenses, or telling a claimant that the insurance company ahs defenses that they wouldn’t actually have.
• Offering to settle claims, at amounts that are far below any reasonable, logical evaluation of the claim’s value.

What are the Damages?

When an insurance company does act in bad faith, the insurance company itself can be sued. That is a separate lawsuit from any suit against any third party for damages in your personal injury case. Damages can be significant even eclipsing the policy value (policy limits) of the actual policy.

First and Third Party Claims

That is when your own insurance company acts in bad faith towards you. But what about when it is the other side’s insurance company? For example, if insurance that covers a negligent driver that hit and injured you, refuses to pay a claim, and acts in bad faith?

That’s called third party bad faith. Unfortunately, the Rhode Island Supreme Court has said that unless it is your insurance company, there are no rights for a third party (an injured victim) to sue the insurer of the negligent victim, for bad faith.

Having problems with your insurance company after your accident or injury? Contact our Rhode Island personal injury lawyers at Robert E. Craven & Associates at 401-453-2700 today.

Sources:

casetext.com/case/asermely-v-allstate-ins-co

investopedia.com/terms/b/bad-faith-insurance.asp