What is insurance bad faith?
After you file a claim in a motor vehicle injury case, it’s natural that you and the insurance company will have an adversarial relationship. In other words, because you’re trying to get money from the insurance company and the insurance company is trying to keep the money, you will not see eye to eye. Unfortunately, sometimes an insurance company can go beyond a “normal” adversarial relationship and handle a case in an unfair manner. This is known as insurance bad faith. In Massachusetts, laws such as M.G.L. c. 176D and M.G.L. c. 93A can provide guidance on how to deal with an insurance company that you believe is handling your claim in bad faith. If an insurance company is found to have acted in bad faith, it could be responsible for multiple damages plus attorney’s fees. However, remember that simply because an insurance company doesn’t agree with you regarding the value of your claim does not necessarily mean that it’s acting in bad faith.
Bad-Faith Claims Handling Practices
When an insurance company denies or delays payment on a claim, refuses coverage contained in a policy, or changes policy terms without notifying an insured party, it can be held liable for financial losses caused by these actions. While you are suffering from an injury, and your medical bills and lost wages are adding up and your insurance company won’t pay a claim or has taken an inordinately long time to process your claim, it may be guilty of bad-faith claims handling. You need to document each and every conversation you have with the insurance company to later prove that it has treated you unfairly.
While this list is not all inclusive, the following can be considered to constitute bad-faith insurance practices:
- Unreasonable delay in paying a claim
- Unreasonably denying a valid claim or failing to properly investigate a claim
- Unexplained or unannounced denial of coverage
- Changes in policy terms without notification
- Cancellation of a policy without due cause
- Reneging on an agreement to pay for a loss
- Reclassifying a loss as an uncovered loss
- Making unfair or unreasonable offers of settlement.
How to Combat Bad-Faith Insurance Companies
You will not get satisfaction in verbally jousting with an insurance company or taking it personally. Arguing with a customer service representative or adjuster is unlikely to resolve an issue if the company stands to lose money. Besides, even if one ignores the bureaucratic factors involved that can complicate matters, insurance companies often behave as if their policyholders are at their mercy – not the other way around.
The best way to combat an insurance company that you believe is acting in bad faith is to write them a settlement demand letter that outlines your case, describes why you are correct, describes what your demand for settlement is, and contains a description of how the insurance company is acting in bad faith. If the insurance company doesn’t offer you a fair settlement in response to the demand letter, you can file a lawsuit directly against the insurance company. Again, there are many nuances to be aware of in filing a lawsuit against an insurance company, not the least of which may require an expert to testify about the insurance company’s behavior.