You pay your insurance company money each year in exchange for peace of mind. You would likely expect them to honor their promise and pay you without complaint if you filed a claim. Yet, this doesn’t always happen. Sometimes an insurer acts in bad faith.
Insurers know that they can dissuade some people from filing a claim if the process is too much of a hassle to bother with it. Many insurers also know that claimants will accept a low payout because they’re unaware of what is reasonable.
Insurance companies operate for profit. They have an obligation to their shareholders to exercise caution when dealing with claims. However, there is a difference between acting with caution and acting in bad faith.
What does acting in bad faith mean?
To bring a bad faith claim, you need to show that two things are true:
- The insurer is refusing to pay what they promised in the policy
- The insurer doesn’t have a valid reason to refuse to pay
Acting in bad faith does not have to mean denying a claim. It can also mean ignoring you, failing to survey the damage, or prolonging the processing of the claim without cause.
If the insurer denies your claim or underpays, look at the reason they give. Check what benefits your policy provides. For instance, check your policy to see what it says they will do if your kitchen floods. Does it say that they’ll only pay for repairs or replace the whole kitchen? Check the terms of the policy, and more specifically, exclusions. Does it exclude flood damage caused by the river rising?
You might want to seek legal help if you suspect that your insurer acted in bad faith. Insurers often change their behavior when you get an attorney involved. The insurer knows that losing a bad-faith lawsuit will cost them more than settling. Protect your interests by holding an insurer accountable for their actions.