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What is a Bad Faith Claim

Updated: Jun 16, 2022

Life can throw you challenges at any moment. Whether you are dealing with the aftermath of a car accident or picking up the pieces from storm damage, filing a claim with your insurance company should provide you with peace of mind. The entire reason for securing an insurance policy is to protect you from damages due to life-altering events. You make your monthly premium payments to them believing they will take care of you if the situation ever arises. However, there are times insurance companies do not keep their end of the deal and actively work to pay you as little as they can. This is an example of bad faith.

Remember, insurance companies are businesses, and like any business, they try to limit how much they are paying out on these insurance claims. Although major insurance companies are multi-billion-dollar companies, they sometimes make every attempt to hold on to that money as much as possible. Many have several tactics they use that unfortunately work, including lowball offers, delays, and exclusions.

However, you have the right to fight back against insurance companies that are not staying true to their contractual obligations. If a judge finds the insurance company is acting in bad faith, you could be awarded more than just the money from the initial claim but could also be awarded compensatory damages and, in some cases, punitive damages. An experienced bad faith claim attorney like those at Galindo Law will help your voice be heard.

Examples of Acting in Bad Faith

Recognizing the signs of a potential bad faith claim can be tricky. Keep in mind, that bad faith practices can occur on any sort of insurance claim including auto, homeowners, or health insurance, to name a few. There are instances when deceiving tactics go unnoticed by the policyholder simply because the insured takes the company at its word. The average person does not necessarily understand the inner workings of insurance companies, made even more difficult thanks to the policy’s language. Interpretation of the law can also be confusing and difficult to maneuver.

It is not uncommon to become easily frustrated with your insurance company, but there is a difference between normal frustrations versus that of intentional tactics to keep you, the insured, from getting what is rightfully owed to you. If your frustration with your insurance grows, you may start to wonder what constitutes bad faith.

Here are some examples of a bad faith claim:

Offering a lowball settlement

Some insurance companies will offer you a lower settlement than what your claim is worth. If you believe you are entitled to more than what is being offered, you do not have to accept the settlement. It will be important for you to analyze the reasons why they are making this offer. In some cases, denial of certain portions of your claim could be valid if your policy does not cover that specific damage. If you feel the company is intentionally denying portions of your claim that should be covered, this could be considered bad faith depending on your policy’s coverage.

Delaying decisions or denying claims

Insurance companies have an obligation to perform their investigations and make decisions on the outcome of your claim in a timely manner. For example, what if you needed surgery after a major accident, but the insurance company takes its time deciding whether it will cover the cost of this procedure? What if you needed a new roof on your home after a storm pummeled through and destroyed almost everything in its path? You more than likely would not be able to afford to fix your roof until the insurance company approves your claim. If you feel the insurance company is stalling, you may be dealing with a bad faith claim.

Delaying your claim, whether by poor communication or lengthy investigations, works in favor of the insurance company. As time goes on and your need for financial help increases, some companies will rely on your desperation and will proceed to offer a lower settlement than what you actually deserve. They could be preying on your insecurity.

In other cases, they sometimes intentionally deny your claim knowing you do not understand the rights you have under your own policy. Some companies will misrepresent and cite your own confusing policy language to back up their decision. This is also an example of bad faith.

Failing to Properly Investigate Your Claim

In an ideal world, an insurance company would actively work to find ways to provide you with coverage. However, many policyholders have found the process to be anything but helpful. It can sometimes feel like the insurance company is working against you to deny your claim rather than working to provide you with the best coverage possible.

Insurance companies are for-profit businesses. Like any good business, it is more beneficial to them to pay you as little as possible. This keeps their shareholders happy. In addition, some insurance adjusters that work for the company may appear to be working to help you but are sometimes given incentives to pad the company’s bottom line.

However, insurance companies are not legally allowed to put their profits over contractual legal obligations to their clients. For example, more expensive insurance claims may only be partially covered as an attempt by insurance companies to save money. If you read your policy carefully, you may find that you are entitled to 100% coverage on the property damage or medical expense in question.

Misrepresenting Policy Language

It may be difficult to understand your insurance policy. Because of this, many policyholders will not take the time to read everything through before entering into a contract with their insurance company. However, the responsibility does not fall solely on you. By law, insurance companies are required to explain your policy, the law, and any exclusions before you sign. If you do not understand your rights within the policy, it can be easy for a company to intentionally misinterpret the law to you. This is acting in bad faith.

Unreasonable Requests to Validate Your Claim

There are instances when insurance companies request so much information from the policyholder that it is impossible to fulfill their requests. While it is not uncommon for an insurance company to ask for certain amounts of documentation and records, their requests cannot be unreasonable or impossible to carry out.

Moving Forward with a Bad Faith Insurance Claim

If you feel as if your insurance company is not holding up their end of the deal, you have options. First, remember to not let your emotions overtake you. If you try to renegotiate with the company, anything you say can be used against you down the line. It is best to reach out to an experienced attorney who can take a hard look at your policy and has experience taking on larger insurance companies. They will also be able to determine if the insurance company’s actions equate to a potential bad faith claim.

You, as the policyholder, have the right to ask questions about certain decisions made regarding your claim. If you do not agree with the settlement amount being offered by your insurance company, you can always ask for a supervisor to review your claim internally. If that does not help, you may want to consider notifying the state insurance division of the act of bad faith. Also, notify the insurance company that you have intentions to file a complaint with the state or sue them for bad faith actions.

As you progress towards your decision of filing a lawsuit, it is recommended you hire an attorney to help. Taking on an insurance company can be an uphill battle. An experienced attorney, like those at Galindo Law, can help you navigate the dicey waters that, undoubtedly, lie ahead. Your attorney will be better prepared and equipped to handle these big insurance companies.

It is important to note that insurance companies can make mistakes in the claims process. If a mistake is made, this does not constitute bad faith. Instead, the insurance company will be given a chance to correct the mistake. Also, disagreeing on a settlement amount is not necessarily an act of bad faith. Your policy might not cover the entire worth of the claim. You will want to review your policy before taking action.

How to Prove Bad Faith

Documenting every aspect of your initial claim and correspondence with the insurance company is vital. If you talked with an insurance agent on the phone, note the day, time, and details of the conversation. Pictures and videos that also are used in your initial claim should be included in your documentation.

If you suspect that your initial claim is going downhill, it is best to get the help of an insurance attorney earlier in the process, rather than later. The great news is that if you pursue a bad faith claim lawsuit, your attorney can get access to all correspondence about your case among insurance company employees. For example, if an insurance agent sends an email out directing employees to not call you back, that e-mail does not reflect well on the insurance company in front of a judge or jury.

Once you retain legal representation, your lawyer may send a formal yet demanding letter to the insurance company on your behalf that may spark a closer look at your claim, in an attempt to reach a fair settlement and stay away from a trial. It is hard to predict how insurance companies will react, but experienced attorneys tend to catch their attention more than one policyholder with zero law experience.

Bad Faith Insurance Settlements

Settlements for bad faith insurance claim lawsuits may vary. The entire purpose of having insurance is to make sure you have the financial ability to get you back to or as close as possible to your original state before the disaster occurred, whether it be getting back enough money to repair your home or having adequate funds to pay off medical bills that have accrued as a result of an accident.

However, it takes time to take on big insurance companies, and that waiting period before a settlement is reached will more than likely cost you. Those costs can come in the forms of loss of work, emotional distress, attorney’s fees, and piling medical bills. Not only could an experienced attorney help you get the correct amount for your initial claim, but you could also potentially be entitled to thousands in compensatory damages and penalty fees that will help get you back on your feet and on the road to recovery.

You have also probably heard the term “punitive damages” before. Punitive damages are considered a punishment to a defendant. For example, a company worth billions of dollars could be forced to pay millions in punitive damages if the court deems the defendant’s acts were egregious. The whole point of awarding punitive damages is to dissuade the insurance company from acting this way in the future. It sends a strong message to the company that foundational trust has been lost and dishonesty will not be tolerated.

Finding an Experienced Attorney

When picking an attorney to represent you in negotiations or even a court of law, it is important to understand their law specialties. If you are struggling to reach an appropriate settlement with your insurance company and you feel that the insurance company is acting in bad faith, you will benefit most by hiring an insurance attorney.

Insurance attorneys help protect the policyholder’s rights as they proceed through the claims process. Their experience with cases can range from property damage and car accident cases to health insurance and business liability claims.

Galindo Law

An insurance lawyer like the attorneys at Galindo Law will be by your side as you take on these insurance companies. With more than 20 years of experience, Cristobal Galindo and staff work to ease the burden you carry after a life-altering event. Galindo Law has successfully won millions of dollars in settlements for its clients. They are true advocates for those being taken advantage of during the insurance claims process. Galindo believes in pursuing what is fundamentally right. He works tirelessly to give his clients a voice and fight for what is rightfully theirs.

Galindo Law understands the immeasurable stress and burdens taken on by clients who are not treated fairly by insurance companies. They are here to help. Galindo Law attorneys are nationally recognized. Their corporate office is in Houston, Texas but they have offices in Beaumont, Seattle, Los Angeles, and Denver. Galindo Law attorneys work on contingent fees. They do not get paid until a settlement is reached.

If you need an insurance attorney to help you devise a strategy for taking on an insurance company,

Or, if you prefer, email us. And thank you for reading our blog!


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