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Defenses to bad faith claims

On Behalf of | Dec 30, 2020 | Civil Litigation |

When a consumer in Ohio signs up for insurance, they place their trust in the company to handle matters. A provider occasionally acts in bad faith, causing the insured to bring a legal claim against the company. Bad faith means that the provider failed to honor the terms of the contract. However, not all bad faith claims against a provider have merit.

Understanding bad faith

Insurance providers in the United States have to provide a service of good faith and fair handling, which includes third-party claims except for “burning limits” cases. “Burning limits” prohibits spending all the policy limits on defense costs. An insured party or third party can sue the provider for breaking a contract.

Bad faith claims apply to all types of insurance including car, home and health. Providers commonly violate this law by denying a legitimate first-party or third-party claim without reason in spite of reasonable evidence. Using deceptive tactics to lure customers or exceeding policy limits also counts as bad faith.

Bad faith defenses

A provider may be able to defend the case by applying the statute of limitations, which gives the claimant a certain time period to file. Some policies also have a time limit that could be applied first.

Sometimes, the insured willfully acts in bad faith. For example, if a person knowingly files a claim to have a cosmetic procedure done that the company won’t cover, the company could argue it was insured bad faith. However, not all states have the insured bad faith defense.

Another argument could be that the insured breached contract such as by not following policy procedures or failing to pay premiums. The provider may have a defense if no contractual relationship exists or the plaintiff fails to mitigate damages.

Bad faith claims require strong insurance defense to be successful. If a provider has a claim filed against them, they may want legal assistance as soon as possible.


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