Your insurance policy is a contract between you and the insurance company. Contrary to how it may feel when you are pursuing your claim, the insurance company has a legal duty to honor the contract, and live up to its end of the deal. Your insurance company cannot just pay the claims it feels like paying. When an insurance company denies a legitimate claim it is a breach of contract.
A duty to act in good faith
Insurance companies have a legal duty to act in good faith. This means to act reasonably and treat you, the insured, fairly. They have a duty to honor the contract and pay for legitimate claims. Insurance companies are notorious for looking for a way to deny or underpay claims, putting their own interests before the interests of the insured. This is not acting in good faith.
Examples of bad faith insurance practices
Insurance companies know that an outright denial of a claim is likely to be contested. So, they have come up with sneakier ways of holding on to their money in bad faith. Bad faith practices include:
- Denying a valid claim
- Denying some, but not all, of the benefits you should receive
- Delaying investigation of a claim
- Delaying payment
- Offering less money than your claim is worth
- Unreasonable interpretation of policy language
Understanding you policy before you purchase
Insurance companies often use ambiguous or confusing language in their policies to set themselves up with a way out of paying. Your insurance agent may even lead you to believe that the policy provides coverage which it does not. Make sure that you truly understand your policy before you buy. Have your attorney look it over and explain it to you if needed.
Low offers and your emotions
One of the easiest and dirtiest tricks that insurance companies use is to offer you some money when you need it most. They will offer you far less than you should receive when they think you are most vulnerable and likely to accept the offer and sign away your right to full compensation.
They know they can get to you when you are in your worst state, such as:
- Right after a tragedy while you still do not know if your spouse or child is going to die
- After they have delayed the claim for so long that you are desperate to get bill collectors off your back, get repairs done, or have a place to live
It is tempting to take the offer and get it over with so you can get on with your life. In reality, the amount that they offer will probably not cover all of your losses. Rather than getting on with your life, you could be signing up for life-long expenses that you cannot afford to pay. Typically, when an insurance company offers you money, they know that they should be paying you far more. Always talk to your attorney before accepting an offer or signing anything.
