Is Your Insurance Company Acting in Bad Faith? Do You Need a Lawyer?

Insurance companies make their living by receiving more in premiums than they pay out in benefits. Be assured that they always do this, whether the company is posting a profit or not. After all, what do you think pays the salaries of all their employees from the lowliest telemarketer to the seven-figure executive? But insurance companies are nowhere near losing money, as the industry posted profits of over $44 billion in 2005, despite payouts for hurricanes Katrina, Rita, and Wilma. And profits grew by $15.6 billion in the first nine months of 2006.

So although insurance companies deny some claims with good reason, that doesn’t mean they should deny your claim, especially if you were led to believe that you would be covered in just such a situation as this.

If this sounds like your situation, you just might be a victim of bad faith insurance practices. Under the law, you are entitled to good faith and fair dealing from your insurance company, but you don’t always receive it. You might be experiencing a bad faith insurance practice if any of the following are true:

• Your insurance company is extremely slow to respond.
• They seem to be looking for an excuse not to pay
• They tell you your policy means something other than it seems to say
• They are vague about what provisions do or do not apply in your case
• They offer you a settlement far below your damages

So what if your insurance company is acting in bad faith? Do you need a lawyer? Yes! But you also need to take certain steps as early as possible to ensure the maximum chance of success for your suit.

Good faith and fair dealing standards

First, you must have a sense of what, exactly, are the expectations placed by the law on your insurance company. To be considered as acting in good faith, your insurance company must:

1) adjust your claim in a reasonable time period
2) cooperate with you to properly adjust the claim
3) tell you in writing precisely why it is denying the claim specifying each contract term or prevision it used to make the decision
4) attempt to find a reason to pay the claim rather than simply looking for reasons not to pay it
5) play fair with you, meaning that it must:
• work with your schedule to set up reasonable times for inspection of claim sites
• try to get all the information it needs in as few interviews / statements / examinations as possible
• not try to confuse the issue with the obscure language of the policy
• and keep you informed of the progress of your claim

Second, you must remember that good faith is a two-way street. Your claim can be sabotaged and any hopes of a successful suit dashed if the insurance company can pin misconduct on you. To avoid such charges, you must:

1) submit your claim in a timely fashion
2) truthfully provide all reasonable information the company asks for
3) give a statement under oath concerning the loss
4) play fair with the insurance company

If you’ve done your part, but they just don’t seem to be doing theirs, then it’s time to look for a lawyer. But it’s not time for you to stop working.

The Write Stuff

The most important thing you can do for your claim is to get everything in writing. Not just the insurance company’s decision, but your claim and any statements you’ve made for them. Don’t give up your claim if the insurance company seems to have a good reason for denying your claim on the basis of the policy’s language. Know that if you think your policy means one thing, and they say it means another, the courts favor interpretations that imply payment rather than denial of claims.

Even while you’re looking for a lawyer, gather information and keep lines of communication open. Find out who your claims adjuster is. Find out who their supervisor is. If necessary, find out who their supervisor. If your claim is not receiving prompt attention, put in a politely and professionally written complaint first to the adjuster, then (if that doesn’t receive action) to the adjuster and the supervisor, then (if that still doesn’t receive attention) to the adjuster, the supervisor, and the supervisor’s supervisor.

If that still doesn’t get attention, then it’s time for your lawyer to get in the action and mix it up. But even then all these letters are not wasted effort. They serve as documentation of good faith on your part, and will be valuable evidence against the insurance company in the event of a trial.