When you purchase liability insurance, the insurance company has a duty to defend you and pay a covered claim. However, sometimes insurance companies may put their profits ahead of these obligations. In every insurance contract, the insurer’s duty is to exercise good faith and fair dealing.
Bad faith is when the delay or denial of your claims or failure to pay a covered claim is without proper cause or unreasonable. Not every claim denial constitutes bad faith. To prove bad faith in Illinois, the insured must prove that (1) the insurer disputed the amount or refused to provide coverage for a valid claim; and (2) that the insurer’s actions were unreasonable. In this blog post, we will discuss when you may have an insurance bad faith claim.
Denying a Claim Without Reason
Anytime an insurance company denies a claim, they must give a reason for their decision. If your insurance company denies your valid claim and refuses to provide you with a reason, you may have a claim of bad faith.
Failing to Investigate
When a policyholder files a claim, the insurance company has a duty to conduct an adequate investigation. If the company fails to do this or conducts a highly intrusive investigation, they are acting in bad faith. For example, the company cannot deny a fire damage claim and charge the insured with arson unless it has conducted a valid investigation.
Offering Less Money Than a Claim is Worth
If you incur a specific dollar amount of damages, your insurance policy should cover the maximum amount under your policy. For example, if someone is involved in a car accident and has $10,000 in medical bills and the insurance company only offers to pay $2,000, this is bad faith.
Delaying Decisions on Medical Claims
When it comes to medical claims, timing is very important as any delay could have serious consequences. If your doctor recommends a course of treatment, your insurance company should timely let you know their decision. If an insurance company delays decisions on medical claims, they are acting in bad faith. Beware of claim demands for “experimental” medical treatments.
Misconstruing Policy Language
As part of their duty of fair dealing, insurance companies must always be truthful about their policy. If your insurance company misrepresents what is covered and your valid claim is denied, you may have a claim. Be careful of how you document a loss of business revenue claim.
Refusing to Pay a Covered Claim
If your insurance company refuses to pay a valid claim, they have breached their obligations and contract. The insurance company may be liable for the bad faith breach.
Refusing Reasonable Requests for Documentation
If your claim is denied, you have a right to request supporting documents they relied upon to reach their decision. They should never refuse to provide you with policy documents.
When insurance companies act in bad faith, they are liable for damages. Depending on the state, the damages available to you vary. In Illinois, bad faith damages include:
- Economic Loss
- Attorney Fees
- Punitive Damages