What Constitutes Insurance Bad Faith, and How Can Policyholders Fight Back?
Insurance companies have a legal duty to act in good faith when handling claims, but many prioritize profits over policyholders. Policyholders rely on their coverage for financial protection, but insurers sometimes engage in deceptive tactics to minimize or deny claims.
Recognizing bad faith insurance actions is crucial when challenging unfair treatment. At Liggio Law in West Palm Beach, Florida, we’ve seen insurers deny valid claims, delay payments, and misinterpret policies to avoid payouts. Read on to learn about common bad faith tactics and how policyholders can push back against wrongful claim denials.
Unjustified Claim Denials
One of the most obvious signs of bad faith insurance is an unjustified claim denial. Insurers may refuse to pay out a legitimate claim without providing a clear or reasonable explanation. This forces policyholders into financial hardship, especially when they need immediate coverage for damages, medical bills, or other expenses.
Some companies deny claims based on vague policy interpretations, shifting the burden onto the policyholder to prove eligibility. They may also misrepresent policy terms to justify rejection.
When an insurer denies a claim without conducting a proper investigation, it raises serious concerns about bad faith practices. Unjustified denials often go hand in hand with another common issue—excessive delays.
Delaying Claims Without a Valid Reason
Insurance companies know that policyholders depend on timely payments, yet some intentionally delay the process to avoid or reduce payouts. These unnecessary delays create financial stress, forcing individuals to cover expenses out-of-pocket while waiting for a decision.
Some insurers repeatedly request additional documentation, even when all required paperwork has been submitted. Others claim they’re still investigating the claim, despite having all the necessary information.
These tactics can frustrate policyholders into accepting lower settlements or even abandoning their claims. Along with delays, insurers may also use misleading policy language to justify underpaying claims.
Misrepresenting Policy Terms to Minimize Payouts
Policyholders trust that their insurance contracts clearly outline their coverage, but insurers sometimes exploit vague language to limit payouts. They may argue that a claim falls under an exclusion or that a specific provision doesn’t apply, even when the policyholder’s interpretation is reasonable.
Insurers often take advantage of complicated legal wording to confuse policyholders into accepting denied or reduced claims. Some companies fail to disclose important policy details until after a claim is filed, leaving policyholders with unexpected coverage gaps.
Misrepresentation of policy terms frequently leads to lowball settlement offers, another sign of bad faith insurance practices.
Offering Unreasonably Low Settlements
Even when an insurer agrees to pay a claim, they may offer far less than what the policyholder is entitled to receive. These lowball offers are designed to pressure individuals into accepting less than the full value of their claim, often because they’re in urgent need of funds.
Some key factors to keep in mind include:
Ignoring repair estimates: Insurers may disregard professional assessments of property damage or medical expenses, offering significantly lower compensation.
Using biased adjusters: Companies sometimes rely on their own adjusters or doctors to minimize claim values rather than consulting independent experts.
Applying unfair depreciation: Insurers may undervalue lost or damaged property by imposing excessive depreciation, even when repairs or replacements are costly.
Creating artificial deadlines: Some insurers pressure policyholders to accept a settlement quickly, implying that waiting could result in an even lower payout.
These tactics force policyholders into difficult financial situations, often leaving them with no choice but to accept an unfair offer. Another harmful practice involves insurers refusing to investigate claims properly.
Failing to Conduct a Proper Investigation
Insurance companies are legally required to thoroughly investigate claims, yet some fail to conduct an adequate review. Instead, they may dismiss claims outright or base their decisions on incomplete or inaccurate information.
Some insurers refuse to gather necessary evidence, ignoring key documents or statements that support a policyholder’s case. Others rely on biased evaluations from their own experts rather than seeking independent opinions.
A lack of proper investigation can lead to wrongful claim denials, forcing policyholders into lengthy disputes to prove their entitlement. Beyond failing to investigate, insurers may also resort to outright deceptive practices.
Engaging in Deceptive Practices to Avoid Paying Claims
Some insurance companies go beyond negligence and actively deceive policyholders to avoid paying claims. They may misrepresent policy benefits, fail to disclose exclusions, or even falsify reasons for denial. These tactics are clear violations of bad faith insurance laws and can have serious legal consequences.
For instance, an insurer might claim that a policy doesn’t cover a particular type of damage when, in reality, the coverage applies. They may also provide misleading information about deadlines, hoping the policyholder misses an important filing date. When insurers engage in deceptive behavior, policyholders must be prepared to take legal action.
Legal Remedies for Policyholders Facing Bad Faith Insurance
When an insurer acts in bad faith, policyholders have several legal options to fight back. State laws provide protections against unfair claims practices, allowing individuals to hold insurers accountable for wrongful denials or delays.
Some key factors to keep in mind include:
Filing a complaint: Policyholders can report bad faith insurance practices to state regulatory agencies, prompting an official investigation.
Submitting an internal appeal: Many insurers have internal appeals processes that require them to re-evaluate a denied or undervalued claim.
Seeking arbitration or mediation: Some disputes can be resolved through alternative dispute resolution methods without going to court.
Pursuing a bad faith lawsuit: If an insurer refuses to act fairly, policyholders may file a lawsuit seeking compensation for damages, attorney’s fees, and additional penalties.
Taking legal action against an insurer can be a complicated process, but it may be necessary to recover the full benefits owed under a policy. Another way to strengthen a claim is by keeping thorough records of all communication with the insurer.
The Importance of Keeping Detailed Records
A strong bad faith insurance claim often depends on the policyholder’s ability to provide thorough documentation. Keeping copies of emails, letters, phone call logs, and claim-related paperwork can serve as critical evidence if a dispute arises.
Insurers sometimes claim they never received certain documents or that a policyholder failed to provide requested information. By maintaining clear records, policyholders can refute these claims and show that they met all requirements.
A well-documented paper trail can also be valuable if legal action becomes necessary. In addition to keeping records, knowing when to escalate a dispute can make a significant difference in resolving an issue.
When to Escalate a Claim Dispute
If an insurer refuses to process a claim fairly, policyholders may need to escalate the matter. Depending on the situation, this could mean requesting a higher-level review within the company, filing a formal complaint, or taking legal action.
Repeated delays, unresponsive claims representatives, or continued low settlement offers are all signs that a dispute needs to be taken to the next level. Policyholders shouldn’t hesitate to push back against unfair treatment, especially when an insurer refuses to uphold its obligations.
When dealing with bad faith insurance, persistence is often key to securing the compensation owed under a policy.
Contact Liggio Law Today
If you believe your insurer is engaging in bad faith insurance practices, you don’t have to face the situation alone. At Liggio Law, we help policyholders fight against wrongful denials, delays, and unfair settlements to recover the justice they deserve.
Our experienced bad faith insurance claims attorney serves clients throughout West Palm Beach and the entire state of Florida. Contact us today to discuss your case and explore your legal options.