When you work with your insurance company, you expect them to act in good faith and to properly consider your insurance claim.
What happens, though, when your insurer uses bad-faith tactics to deny your claim?
Let’s be clear: It’s illegal.
Insurance adjusters and insurance companies cannot use bad-faith tactics to deny claims, and there are consumer protection laws in place to prevent insurance companies from acting in illegal ways. The trouble is that handling bad-faith tactics for an insurance claim can be challenging, especially for someone who does not work in the insurance industry or for someone who has never had to file a claim before.
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Types of Insurance Company Bad Faith
Bad-faith tactics can be challenging to identify, which makes them difficult to prove. There are many ways insurance companies can act in bad faith, so it’s essential to know what to look for. The first step to understanding bad-faith is knowing which type of claim you’re trying to prove. There are two types of bad-faith claims:
A first-party bad-faith claim occurs when you, the insured, make an assertion that your insurance company did not perform its duties as an insurer to process your claim properly. For example, if there is a fire in your home, you would make a claim to your insurance company to cover the cost of the damages.
However, your insurance may be using bad-faith tactics if they:
- Fail to conduct a thorough investigation of the claim in a reasonable amount of time.
- Offer an unfair or inadequate valuation and settlement offer.
- Fail to approve or deny a claim with an explanation in a reasonable amount of time.
- Delay payment after a claim has been approved.
Alternatively, third-party claims occur when the insured individual alleges that the insurance company did not adequately represent you and your interests. For example, if someone slips and falls in your home, your insurance company would represent you as you work to come to an agreement with the injured party and their insurance.
However, your insurance may be using bad-faith tactics if they:
- Fail to defend you and your interests. (Note: they only have a duty to defend you the incident is covered by the insurance policy.)
- Refuse to pay for claims that are covered by the insurance policy.
- Refuse to settle a reasonable claim.
Common Bad-Faith Tactics
If you have gotten injured as a result of another person’s negligence and you are involved in settlement negotiations with that person’s insurance company, at some point you will need to deal with an insurance claims adjuster.
The insurance claim adjuster represents the interests of the negligent party and their insurance company. It is their job to make sure the insurance company pays you as little as possible. To do that, the insurance claim adjuster will:
- Investigate the personal injury claims you have made against their client.
- Search for any possible reason they can deny your claim.
- Determine if their client is indeed liable for the accident.
- If so, they will then use computer-determined formulas to assess the maximum amount they could pay you.
- Try to convince you to accept the offer for the lowest amount possible.
None of this is, in and of itself, illegal. As we noted above, the insurance claim adjuster’s mission is to do the best job they can for their company, and that means paying you the lowest possible justifiable amount. Insurance claims adjusters receive training, known as “claim evaluation techniques,” that teach them negotiation tactics they can use to either deny claims or negotiate a minimal payment.
When you try to negotiate your insurance claim yourself, you accept this part of the equation.
In these kinds of situations, however, there is a fine line between legitimately trying to reduce the size of a payout and negotiating in bad faith. Legally, “bad faith” refers to unfair or dishonest practices. If you are representing yourself, it is essential to recognize when the claims adjuster may be negotiating in bad faith.
Two key signs this may be happening are:
- The adjuster denies your claim outright and for no discernible reason.
- Whatever type of injury you have suffered, there is a history of settlements pointing toward a reasonable payout sum. However, the adjuster refuses to settle for anything close to this amount by manipulating facts or misstating the law involved.
If you believe you have been the victim of bad-faith negotiations, you should immediately contact an attorney with experience in dealing with insurance company adjusters. Your goal is not to sue the insurance company, but to have the lawyer help you properly notify the company of the actions of its claims adjuster. We’ll have more details on how to do that below.
Meanwhile, here are some other signs the claims adjuster is negotiating in bad faith:
- Denying your claim without investigating it.
- Delaying as long as possible telling you whether they were providing coverage for their client at the time of your injury.
- Refusing to negotiate with you after you have filed a claim against their client.
- If their client is responsible, they take an unreasonable amount of time to pay you.
- They do not promptly and thoroughly investigate your claim.
- Though their client’ s liability is clear, they hesitate to negotiate a fair settlement.
- They do not provide you with specific, understandable reasons for why they have denied your claim.
- They try to manipulate the law to deny your claim or pay you the least amount possible.
- Once you’ve entered negotiations, they suddenly change adjusters to drag out the process as long as possible.
- They fail to provide you with information that is relevant to your case.
- The insurance company makes unrealistic and unnecessary requests for documentation for you to support your claim.
- In an attempt to let the statute of limitations expire, they delay negotiations or fail to share relevant information with you.
- They deliberately tell you the wrong statute of limitations that applies to your claim.
- An insurance company uses threatening, rude, intimidating or abusive language in their negotiations with you.
- Deliberately misusing medical or legal terms to minimize your payment or to deny your claim.
If you believe any of the above items are happening to you, you may be involved in a bad-faith negotiation. It is essential to realize, however, that these acts alone will not prove you are in a bad-faith negotiation.
Under common law, you need to be able to prove the claims adjuster or the insurance company knew their conduct was unreasonable and was conducting bad-faith negotiations on purpose. That is hard to do. It would be easy for an insurance company or claims adjuster to merely claim they were unaware you felt that way, and that they were sorry if you had misinterpreted their hard-core negotiation tactics.
A statutory claim, however, typically has a lower standard of proof. You only need to show a benefit to which the insurance company’s policy entitles you had gotten deliberately delayed or denied.
Examples of Bad-Faith Negotiation
What are the kinds of situations where you may find yourself involved in bad-faith negotiations with an insurance company? It can happen every day in cases where an insurance company should respond quickly and promptly, but doesn’t. Here are some examples:
- You discover mold in your basement, perhaps from a leaking pipe. Your homeowner’s policy covers mold removal, but the insurance company fails to send anyone to investigate your claim for several weeks or even months.
- Neighborhood vandals damage your car while it is sitting in your driveway. You submit a claim and speak with a claims adjuster over the phone. They deny your claim, however, saying the damage to your car already existed. The claims adjuster does not bother to inspect the damage themselves or take into consideration any estimates for the repairs from a body shop.
- During a severe storm, flying debris or fallen branches damage your home. The insurance company offers to settle for one-quarter to one-half of the amount your policy states they will provide.
- You get involved in a car accident where you may be partially at fault. You know, however, the other party involved with the accident is much more responsible. You try to file a claim with the insurance company, but they attempt to prevent you from making the claim by saying you cannot do so, since you were partially to blame.
- Someone steals a piece of valuable equipment from your small business, a theft covered under your insurance policy. You file a claim, but hear nothing from the insurance company. You try calling, emailing and even writing letters, but they never respond.
All of the above can be examples of how an insurance company or an insurance claim adjuster can negotiate in bad faith. Sometimes, this happens because the insurance company hopes you will give up your claim because it is taking too long. They may be trying to drag out your case until the statute of limitation on the original incident expires. Other times, their only goal is to avoid paying you what they owe you.
When you are negotiating on your own, the insurance company and their claims adjuster think they can pull these things off because you do not know any better. Therefore, at the first sign of a bad-faith negotiation, you must contact an experienced and knowledgeable lawyer who knows how to deal with these insurance company tactics.
How Should You Handle Bad-Faith Tactics?
When you feel you have been the victim of bad-faith negotiations, one of the best ways you can protect yourself is to keep detailed records and documentation of all your communication with a claims adjuster or the insurance company itself.
If you are handling negotiations on your own, it is a smart idea to keep a physical or digital journal of all your interactions about your claim — whether they take place on a phone call, online, by mail or via text or social media.
If you think the claims adjuster who is handling your case has been negotiating in bad faith with you, keep a detailed account that includes descriptions of their actions and when they occurred. Even if you know the adjuster will probably not send you any written correspondence, always ask for it and note in your records that you did.
Writing a Bad-Faith Demand Letter
If your claims adjuster continues to ignore your requests for documentation or continues to act in a manner you believe is in bad faith, it is time for you to write a bad-faith demand letter to the insurance company. If you have not done so, this is probably the best time for you to start working with an attorney familiar with the kind of tactics or dirty tricks insurance companies can use.
When you write your letter, do not start by threatening a lawsuit. Remember, you want to appear as the reasonable party. If you later reach a point when you do need to file a lawsuit, you should prove you made every reasonable attempt to settle the issue with the insurance company, yet they continued to ignore you.
Use the letter to provide detailed notes about when you communicated with the claims adjuster and why you think they are acting in bad faith. Cite specific examples you have recorded in your journal that include the times and dates of these interactions. Inform the insurance company that the claims adjuster has refused to comply with your request for more information or documentation.
The idea behind the letter is to send an unmistakable message to the insurance company that you are not going to put up with any possibly illegal nonsense. You want the insurance company to understand you are aware of what is happening. A bad-faith demand letter is the first step in communicating that message. Insurance companies know if you’re familiar enough with the process to send a bad-faith demand letter, you are also aware it is the first step toward notifying the state insurance board of their actions or filing a lawsuit.
Making a Report to the State Insurance Bureau
If you believe the claims adjuster or the insurance company is continuing to engage in bad-faith negotiations, you should file a complaint with the Pennsylvania Insurance Department.
At this point, the bad-faith demand letter you wrote and the documentation you have been keeping will start to pay off. Once you file a state insurance board letter, the department will open an investigation into the insurance company’s actions.If the department investigator finds the insurance company or the claims adjuster has acted in bad faith, the department can levy significant fines against the company, as well as take other punitive measures. The state insurance board cannot, however, compel the company to pay your unlawful denied insurance claim.
Insurance companies want to avoid paying these heavy fines, which can often cost them far more than if they had settled with you in the first place. They are also aware the next step is for you and your attorney to file a lawsuit.
Filing a Bad-Faith Lawsuit
Lawsuits cost a lot of money, and if you can prove the insurance company or their claims adjuster acted in bad faith, it can result in a rather large monetary verdict against them. That is why writing a bad-faith demand letter can often produce the results you have been hoping for.
However, if you have exhausted every other option and the bad-faith insurance company is not willing to settle, you will have to take the only remaining step: Filing a bad-faith lawsuit. If you have not done so already, you will need to hire a lawyer if you want any chance of success. Bad-faith lawsuits are notoriously challenging, so you are going to need the best advice and guidance from someone who is familiar with the laws and your rights. You will not just need a lawyer — you will need a bad-faith insurance lawyer.
You may need to file in state or federal court, depending on which forum has jurisdiction over the insurance company. Your lawsuit may add on additional claims, like negligence, breach of contract or fraud, depending on the circumstances of the case. Even if the company agrees to settle the claim, you can still move forward with the lawsuit.
Let the Experienced Attorneys at KBG Injury Law Help You Deal With Bad-Faith Insurance Companies
If you are having trouble getting through to your insurance company or having them address your claim, or if your insurance claim is denied for no reason, it can be a good idea to consult with an insurance attorney. An insurance attorney understands the difference between bad-faith tactics and legally acceptable delays and maneuvers. He or she can help you understand your rights and can negotiate with insurance companies to ensure your claim gets processed correctly. If an insurance company does act in bad faith, an insurance attorney can help you prove an unlawful denied insurance claim and can work to secure your insurance payout.
If you are dealing with an insurance company that is behaving in an unreasonable and possibly illegal way, contact KBG Injury Law immediately for a free consultation. Time is essential in these cases. KBG Injury Law has been helping central Pennsylvania policyholders for more than three decades, so when you turn to us, you are working with an experienced team of attorneys.
You can reach us at 800-509-1011 or visit our contact us page, where you can leave us your details and some information about your concerns. A member of our team will follow up with you as soon as possible.