What Is a "Bad Faith" Insurance Claim?
Every insurance company owes a duty of good faith and fair dealing which basically means that your insurance company:
adjusts your claim promptly (either pays it or denies it)
- cooperates with you regarding the claim (timely responds to your letters and phone calls)
- informs you in writing precisely why it is denying the claim by specifically identifying each contract term or provision upon which it relies
- attempts to find a basis to pay the claim rather than find reasons not to pay your claim
Do I Owe Any Obligations To My Insurance Company Concerning My Claim?
Yes. You have an obligation to act fairly and deal in good faith with your insurance company. Your obligations include:
- timely paying your premiums
- timely submitting your claim
- providing all information that the insurer is entitled to it under the policy or the law
- giving a statement under oath (only to your insurance company); and
- generally cooperating with your insurer regarding the loss
Is There Anything In Particular I Should Remember When I Am Making A Claim?
When addressing problems with your insurance company, remember to put it in writing. This includes not only the claim itself, but also all communications with an adjuster.
If you speak by phone with someone at the insurance company, make a written note of it and keep it in a separate file. If someone is rude to you, make a note of what he or she said, his or her name, and the date of the note.
What If The Company Appears to Be Simply Dragging Its Feet On My Claim?
- put your complaint in writing and send it to your insurer
- know who the claims adjuster is and correspond with him or her in writing
- ask who the claims adjuster supervisor is and send him or her a detailed and direct letter
Trying to copy the "president of the company" with your letter probably will not do too much. Copy the "claims supervisor" or "senior benefit analyst" on your letter to the first line claim adjuster. Do what you can first. Send the letter; put it in writing; and ask for written response within a reasonable specified time. Be firm, but be polite and rational. If the foot dragging does not stop, you may need to contact an attorney.
Can't My Insurance Agent Help Me?
Generally, no. An insurance agent sells you insurance. The insurance adjuster "adjusts" your claim. An agent may be of little benefit after you have made a claim. He or she may have some limited authority to resolve a claim, but nothing more. The insurance company does not want personal relationships to interfere with its "adjustment" of your claim.
What About The Insurance Department?
North Carolina Department of Insurance can be reached by calling (800) 456-5664. However, it cannot follow up on every complaint and often defers action. In most cases, you will be told to hire an attorney.
Do not wait on the Department of Insurance to proceed on your claim. You may never get a response or the response may not be helpful, and you may have allowed one or more statutes of limitations to expire. A statute of limitations is a time limit within which a lawsuit must be filed. A complaint with the Insurance Commissioner does not postpone the statute of limitations.
I Have Not Read My Insurance Policy. I Am Not Sure Of The Amount Or Extent Of my Coverage And I Am Not Even Sure If My Claim Is Covered. Does This Bar My Claim?
Assuming the time specified in your policy to submit a claim has not passed, the insurer has an obligation to adjust your claim, even if you do not know the extent of the claim or terms of coverage which might apply.
The Insurer Has An Obligation To Act In Good Faith And Conduct A Proper Investigation Of Your Claim. Can I Assert A "Bad Faith" Claim On Any Type Of Insurance Claim?
No. It depends on the type of claim and the regulations of the policy. Generally, claims handled for disability or health may be preempted by the Employer Retirement Income Security Act ("ERISA"). ERISA applies if your employer "administers" your insurance benefits. ERISA limits your recovery to the value of your claim plus attorneys fees, as set by a Judge. You are also denied the right to a jury trial. As a result, there is initially no penalty for an insurance company to deny or limit your claim. Punitive damages, usually recoverable in a bad faith case, are precluded in an ERISA case. ERISA claims usually involve medical or disability insurance.
However, do not take the insurer's mere assertion that the policy is "ERISA regulated" as gospel. Some policies which the insurer claims are ERISA plans are outside ERISA regulation. In such cases, contrary to the position often taken by the insurance company, a bad faith claim with a possibility of extra contractual damages may indeed apply.
Other claims for life insurance benefits, casualty loss or claims under personal policies may allow a bad faith claim.
What If My Insurance Company Tells Me My Claim Is Not Covered Due To A Particular Provision?
If a policy provision is subject to more than one interpretation, and your interpretation is a reasonable one, the insurer is usually bound by that interpretation. The policy is interpreted against the insurance company because it wrote the policy.
After I Have Filed A Claim, My Insurance Company Offered Me A Settlement. It Looks To Me That The Offer Is Too Low. What Can I Do?
You have the right to recover the full value of your loss as determined by the insurance policy coverage, but insurers often seek to settle claims for less than the full amount. If the insurance company is offering a settlement that is completely out of line in order to save it money, that may be found to be an act of bad faith. Intentional low-balling is simply a type of bad faith.
My Insurance Company Refused To Settle Within My Policy Limits. Do I Have To Pay the Excess Instead Of The Insurance Company?
Generally, yes. However, your insurance company owes you a duty of good faith. If you have a policy that has a $100,000 limit, and the injured person received more than $100,000 in a judgment, you are responsible for the amount over $100,000.
The insurance company cannot refuse to settle because it has nothing to lose by letting it go to trial. It should try to protect your rights, not its money. If your insurance company refuses a reasonable settlement offer within the policy limits, the insurance company may be held liable in a bad faith action for all damages you suffer, and possibly punitive damages. Although the attorney hired by the insurance company is ethically obligated to represent you, do not forget that the insurance company is paying his or her fee. You may need to consult a personal attorney to make sure your personal assets are protected.
Are There Any Time Limits On My Stating A Claim Of Bad Faith Following The Denial Of My Claim?
Most insurance policies have specific time limits on when a claim must be filed after a loss, and also when any lawsuit "on the policy" may arise. If there is some question as to what precisely is that time limitation, it is recommended that a bad faith claim lawsuit be filed as soon as possible, in order to be certain that your right to recover certain types of damages (punitive damages, for example), is not lost. In North Carolina, the general statute of limitations is three years.
The Insurer Has Recently Told Me Over The Phone That My Claim Is Being Denied. What Should I Do?
Immediately request that the denial be put in writing and that the insurer specifically tell you all the reasons why the claim is being denied. My claim was denied by the insurance company.
What Do I Do Now?
Contact an attorney.
I Cannot Afford To Pay A Lawyer. How Can I Fight The Insurance Company With All Its Money And High Priced Lawyers?
The good news is that you can fight the big insurers and their legal counsel. There are attorneys, like us, who handle insurance bad faith claims on a "contingency fee basis." This fee arrangement allows you to pursue your case with attorney fees which are based on an ultimate recovery or settlement.
If you believe that your claim has been unfairly denied or that the insurance company has acted unreasonably, do not simply let it go. Pursue your claim and assert your rights. Your actions could benefit not only you, but also others who have been disadvantaged by the large and powerful insurance companies. You can fight and win.