What Is a Bad Faith Claim?
The Basic Facts You Need to Know
When it comes to resolving a claim, insurance firms are in charge. They are more knowledgeable, have more bargaining power, and have more financial resources than the policyholder.
Most courts recognize this and establish a duty of fair dealing and good faith in every insurance policy. You may be able to bring a lawsuit if you sense your insurance company committing bad faith.
State law shapes the definition of a bad faith claim. You may have a claim due to a breach of state laws or through common law established by courts.
Let's take a closer look at what defines bad faith claims to comprehend this legal argument better.
Common-Law Bad Faith Claims
The elements of bad faith in common law differ from state to state. In certain states, bad faith is behavior that is "irrational or without legitimate cause."
Some states consider this claim a violation of contract to complicate matters, while others consider it a tort. Other states have a more limited perspective. Only when a refused claim is not "fairly arguable," and the insurance company is aware of the circumstances may the courts establish responsibility.
An insurer owes its policyholders fair conduct and a duty of good faith under common law torts doctrine. A policyholder must prove two factors to establish a common law claim of bad faith:
- If your insurance company withheld benefits due.
- The reasoning behind withholding the benefits was unreasonable.
The courts have noted other actions that they see as bad conduct. These actions can include misrepresentation of facts and failure to act promptly when a person makes a claim. There are many other actions that the court sees as bad conduct.
Statutory Bad Faith Claims
Lawsuits might include a statutory and common law claim for a bad faith insurance claim. A statutory claim refers to a statute passed by the legislature of a state.
Many states have laws in place to protect policyholders from insurance firms' misleading or unfair activities. This legislation will specify the kind of banned conduct as well as the policyholder's options for redress.
As a policyholder, you can allege several scenarios to make a statutory bad faith claim. For example, you can allege that your insurance company didn't provide a reasonable explanation for the denial of your claim. Or maybe the insurance company didn't exercise proper standards to investigate your claim.
Making a Bad Faith Claim
Insurance companies use several strategies that the courts could consider as bad faith. And the laws governing bad faith litigation differ from one state to the next.
An expert insurance attorney can help you safeguard your rights if you suspect your insurance company behaved in bad faith. To determine whether your insurer is operating in bad faith, speak with a bad faith insurance attorney.
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