It is not unusual to have a disagreement with your insurer about how much your claim is worth. However, what is unacceptable is if your insurer denies or delays your claim by acting in bad faith. Bad faith is a very important term in contract law, especially when concerning insurance claims. Simply put, an insurer is supposed to act in good faith when investigating your claim. By acting in bad faith, that insurer may deny your claim for illegitimate or spurious reasons. Bad faith is not the same as negligence or simply making an honest mistake; rather, it happens when the insurer intentionally takes actions or fails to take actions so as to avoid paying out on a claim. Here are six of the most common bad faith tactics some insurers use.
Failing to investigate fully
An insurer may have grounds to deny a claim, but if that insurer does not investigate the claim completely then it is acting in bad faith. A complete investigation ensures that a person’s claim is given the attention it deserves and that the insurer is taking the facts of the case into account when deciding on that claim. If the insurer comes to its decision suspiciously fast or gives reasons for its rejection that seem to have little to do with your claim then these may be indications that the insurer has failed to carry out a thorough investigation. In some rare cases, the insurer may flat out tell you that it will not investigate the case or it may simply not respond to your claim at all. While such blatant bad faith tactics are rare, they can be incredibly frustrating to deal with when they happen.
Excessive paperwork demands
While some insurers may fail to make a full investigation, it can feel as though other insurers are overly zealous about their investigatory techniques. If an insurer is making constant demands for more information and more paperwork what is happening may not be a case of the insurer simply being thorough, but rather trying to drag the investigation on for as long as possible so as to delay deciding upon the claim. Of course, some claims will require a substantial amount of paperwork, but be careful about insurers simply demanding excessive paperwork. They may be trying to delay, look for a spurious reason for denying your claim, or hope that you’ll become so exhausted by the process that you’ll just give up.
Misrepresenting an insurance policy
Insurers know that you probably haven’t read the fine print of your policy in too much detail and an unscrupulous insurer will use your lack of knowledge in that regard to its unethical advantage. An insurer that misrepresents the terms of your policy or misrepresents the facts of your case is engaging in bad faith. In many cases, the insurer is simply hoping that the claimant will take the insurer’s word on the policy for granted, which, sadly, many claimants do. You should take to a lawyer if your insurer is making a claim about your insurance policy that you disagree with or don’t remember agreeing to.
Cancelling a policy
Likewise, an insurer may try to cancel your insurance policy after you have made a claim. Again, insurers will often rely on a misrepresentation of the fine print in the policy to justify their decision. While cancelling a policy after a claim has been made may be legitimate in some cases, it is at least a red flag that the insurer may be acting in bad faith. Some insurers, for example, may try to find a technical reason for cancelling your policy, such as by claiming that an honest mistake on your policy application that has nothing to do with your claim means that the policy itself is null and void. Again, talk to a lawyer if your insurer tries to cancel your policy after you have filed a claim.
Offering a really lowball offer
There is room for negotiation in most insurance claims, but that does not give the insurer the right to offer a payout that is substantially below what the claim is actually worth. In some instances, the insurer may offer a ridiculously low offer in the hopes that even if that offer is negotiated upwards it will still remain well below what it should pay out given the facts of the claim. The initial offer is designed to make the claimant feel as though he or she was being unreasonable by expecting a much larger payout in the first place. From there, the insurer generally has an easier time of getting the claimant to accept a low settlement.
Many bad faith tactics are designed simply to stoke confusion and frustration on the part of the claimant. One surefire way of getting a claimant to feel as though his or her claim is going on forever is for the insurer to switch adjusters in the middle of your claim. While switching adjusters may sometimes be necessary, such as if you move or the previous adjuster is no longer able to handle your case, in many instances it is simply a delay tactic. Like many such delay tactics, the insurer here is simply hoping that the claimant will get so frustrated that he or she will either stop pursuing the claim or will be more willing to accept a lowball offer.
Proving bad faith by an insurer is not always easy and the laws concerning bad faith claims differ substantially from state to state. Furthermore, many people only have limited if any experience dealing with insurance adjusters, meaning they are often unaware of what to expect in terms of good versus bad faith tactics. That’s why anybody pursuing an insurance claim would be well advised to at least consult with somebody who has experience dealing with insurers. If you suspect your insurer is acting in bad faith then it is important to contact a lawyer as soon as possible for advice on your case.