What Constitutes Insurance Bad Faith?
Insurance companies have an obligation to honor the terms of every policy they write. That means when someone files a valid claim, the carrier must act in good faith by investigating the situation thoroughly and then reimbursing the party in a timely manner.
Unfortunately, since insurers are trying to run a business like any other, they’re not necessarily inclined to distribute hefty payouts. Their primary goal, in fact, is to protect their own bottom line, which can prompt them to act in bad faith.
Insurance bad faith is characterized by a violation of the implied covenant of good faith and fair dealing, which is included in every policy. When a carrier accepts a policyholder’s money, it’s with the promise that they’ll abide by the terms of the contract in the event of a claim. Failing to do so is considered acting in bad faith and may warrant legal action.
What Are Some Common Examples of Acting in Bad Faith?
There are dozens of ways insurers can breach their duty to act in good faith. Some of the most common—and egregious—examples of bad faith include:
- Denying a claim despite it involving a covered event,
- Taking an unnecessarily long time to process the claim and get the proceedings underway,
- Understating the policy’s limits,
- Failing to investigate the event that corresponds to the claim in a proper manner,
- Offering an unfair settlement,
- Underpaying the claimant or distributing only partial payment, and
- Cancelling the policy for no valid reason.
What Kind of Recourse Do You Have If an Insurer Acts in Bad Faith?
When a carrier breaches their duty to either the policyholder or a legitimate third-party claimant, they risk legal action. Claimants who believe they have been wronged can file an action against the carrier in pursuit of damages.
Should the insurance bad faith claim be successful, affected parties can secure the benefits they were previously denied. They may also be entitled to compensation for any consequential losses they incurred as a result of the prolonged proceedings, like attorneys’ fees. And depending on the severity of the carrier’s behavior, a punitive award may be in order, as well.
In Florida, tort law allows for the recovery of punitive damages when the defendant’s conduct constituted intentional misconduct or gross negligence. It’s important to note, however, that such damages are usually capped at three times the total compensatory damages or $500,000, whichever is greater. As there are a few exceptions to this cap, it’s wise to discuss the facts of your case with a knowledgeable local attorney, so you know what to expect along the way.
Speak with a Lakeland Insurance Bad Faith Attorney
If you think the carrier that was supposed to process your claim acted in bad faith, turn to Capaz Law Firm, P.A. A proud member of the Million Dollar Advocates Forum, attorney Dereck Capaz is well-versed in bad faith insurance claims.