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What Is Insurance Bad Faith?

By Sean Burke on February 21, 2014

Orange County Insurance Bad Faith AttorneysWhen you chose your insurance company, you probably assumed that the company would always be on your side. After all, they exist to help you when times get tough, right? Unfortunately, as far as insurance companies are concerned, they exist to make a profit. Therefore, when you file a claim, companies often do everything in their power to cut costs - even when it means denying your rightful damages. Fortunately, the law is on your side. Insurance companies are regulated by state law, and when a company refuses to pay your damages and fulfill its contractual obligations, they are guilty of bad faith. In this blog post, Orange County personal injury lawyer Sean Burke reviews how insurance bad faith claims are filed.

Types of Bad Faith Claims

Insurance companies (and the clients they represent), are bound by an implied covenant of good faith and fair dealing. This means that when they enter into a business agreement, they are legally bound to act honestly and to meet their obligations to each other. An insurance company may fail to fulfill this implied contract in several ways, including:

  • Delaying response to your claim
  • Denying a reasonable claim
  • Failing to provide adequate reasons for denying your claim
  • Misrepresenting policy coverage in an attempt to deny or reduce your claim
  • Requiring you to provide unreasonable documentation or perform unnecessary actions to obtain your compensation

In short, failure to grant legitimate coverage or to fulfill the conditions of an insurance policy is prohibited by state law. Though regulations vary from state to state, if you have been a victim of a bad faith insurance claim, you have legal recourse.

First Party vs. Third Party Insurance

In most situations, insurance companies are required to cover both first and third party claims. First party claims directly affect the insured. For example, if your home is damaged in a storm, your homeowners insurance should cover it on the basis of a first party claim. Third party insurance covers other parties who are not directly insured by the company but for whom the insured has a legal responsibility. For example, a store owner might have insurance to cover any claims made by an injured customer who slips inside the building. Third party car insurance covers damage or injury done to other drivers and passengers in the event of an auto accident. Both first and third party insurance claims are included under implied covenants of good faith.

Your Responsibility toward Your Insurance Company

Of course, an implied covenant does not only apply to the insurance company; as an insured party, you also have a responsibility to the insurance company. Your duties include:

  • Timely payments on your policy
  • Timely submission of your insurance claim
  • Honest representation of the circumstances surrounding your claim
  • Providing thorough and detailed records
  • General cooperation with your company throughout the claim proceedings

If you fail to fulfill your part of the covenant, you may not have a legitimate basis for a bad faith insurance claim

Contact an Attorney

A bad faith insurance claim is a serious legal offense and a gross injustice. If you are the victim of a bad faith insurance claim, contact personal injury attorney Sean Burke to get the financial compensation you deserve.

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