Both federal and Ohio state laws create legal obligations for insurance providers. They must attempt to uphold their insurance policies in good faith based on the coverage people expect to have.
If someone believes that an insurance company has mistreated them or has failed to uphold their policy obligations, they might allege bad faith insurance practices. When might your company be at risk of litigation over bad faith insurance practices?
When you only disclose coverage limitations after a claim
Trying to retroactively add a deductible or maximum benefit limitation to a policy when someone files a claim could constitute bad faith insurance. People should know what coverage they have based on their policy documentation, and there should not be undisclosed limitations or costs.
Even though the timing might be coincidental, the claimants or the courts might view your company’s motivations as suspect if you change the terms of a policy right when someone makes any’s claim.
When you deny a claim that clearly falls under the scope of the policy
Insurance companies protect themselves from unnecessary losses by limiting when and why people can bring claims. Provided that the situation leading to a claim is covered by the policy in question, an outright denial could easily lead to bad faith insurance practice allegations.
When you delay the payout on an approved claim
People dealing with medical issues, job loss or car crashes are often in dire financial circumstances. They depend on their insurance coverage to cover their costs.
Unreasonable delays could lead to hardship for the policyholder or claimants and also constitute bad faith insurance. Understanding what practices could lead to allegations of bad faith insurance can help your company avoid potentially expensive lawsuits.