In the insurance world, you may have heard the term “bad faith claim,” but do you know what it actually means and how it could affect any pending insurance claim you may have?
An insurer has a legal duty to act in “good faith” when handling claims, which means that it must conduct a fair and prompt investigation of those claims, and it must also take reasonable steps to settle them. When the insurer decides to take certain action or no action that conflicts with its duty, without a reasonable or justifiable excuse, it is usually considered to be acting in “bad faith,” and you may be able to recover additional damages.
Your right to recovery from a “bad faith” claim partially depends on your relationship with the insurer. Your insurance policy is a contract between you and your insurance company, which creates duties for both of you. For the insurance company, a legal duty is imposed upon the insurance company to act in good faith when handling any claim that you file with it (e.g. property damages under your collision coverage, medical bills under your policy’s medical payment coverage, losses filed under your uninsured motorist coverage, & etc.)..
When you do not have a contractual relationship with the insurance company handling your claim, the duty of good faith in your favor does not exist. That is the case when you file a claim against an insurance policy that does not provide coverage to you. For example, if you are involved in an accident with another driver who is at fault, you must initially file your claims against the other driver’s insurance policy. Because you are not a named insured/covered under that policy, there is no contractual relationship between you and the insurance company who issued that policy. Therefore, the insurance company has no duty to act in good faith when handling your claim. In fact, has the right to take action adversarial to your claim.
Louisiana law lists a number of things that insurance companies do — or don’t do — that are considered bad faith, which are:
- Misrepresenting important facts or insurance policy language that relates to the insurance coverage at hand.
- Failing to pay a settlement within thirty days after the settlement agreement is put in writing.
- Denying coverage or attempting to settle a claim using information from an insurance application that the insurance company knows has been altered, but did not tell their insured about or try to get his/her consent to take that action.
- Misleading a claimant about the length of time that person has before he/she has to file a lawsuit to preserve a claim.
- Failing to pay any amount of its insured’s claim within sixty days after insured provides proof of his/her losses, when such failure is arbitrary, capricious, or without probable cause.
- Failing to pay other claims listed under Louisiana law in a manner that is arbitrary, capricious, or without probable cause.
Can you get damages from a bad faith claim?
If you are able to prove that the insurance company has acted in bad faith, some of the additional damages you may be entitled could include:
- Enhanced Compensation – An enhancement by the court of the monetary sums that the court found was owed to you in damages prior to the insurance company’s bad faith. For example, the court may determine that the $100,000 that you were already owed, should be increased by 20%, bringing your claim for those damages to $120,000.
- Attorney fees;
- Excess Judgment – Award in damages over and above the recovery limits that the insurance company would have enjoyed in the absence of its bad faith;
- Interests – award of interest on amounts in penalties that the court is imposing against the insurance company due to its bad faith; and
- Additional Amounts – Any other amounts in damages and penalties that the court may decide to impose against the insurance company.
Bad faith claims are often very difficult to prove. That’s why those claims should be handled by an experienced car accident attorney who is knowledgeable of the Louisiana bad faith laws. If you or someone you love believes you are falling victim to an insurance company’s bad faith handling of your automobile accident claims, contact Danny Russell’s office today.
****Information furnished herein is only general and not a substitute for personalized legal advice.
****The photograph above is not a depiction of any actual event or scene, but merely a dramatization.