Here is how insurance should work: A client asks a company to insure them for something. The insurer calculates the risk and quotes them a price. If the client accepts, they pay the premiums as agreed. Provided they do, the insurer then pays out if an event covered by the policy occurs.
Sometimes an event occurs, the client claims, and the insurer does not pay out. That’s when the possibility of bad faith may arise.
Insurers may have a valid reason not to pay up
Many people sign up for insurance policies without reading all the fine detail. Hence some may think they are covered when they are not. If that is the case, the insurer does not need to pay anything.
Sometimes they just don’t want to pay
Insurance companies run for profit, and some may try to avoid their duty to pay out. There are various ways they might do this:
- Failing to respond in the hope the client will give up
- Denying the claim on a pretext
- Ignoring vital evidence or failing to seek enough evidence
- Agreeing to settle but vastly undervaluing the claim
If any of these happens, the client may claim the insurer is not upholding their part of the agreement and acting in bad faith.
What if you believe your insurer is acting in bad faith
The first thing is to get legal help to ascertain whether the insurance company is acting in bad faith or you have misunderstood the information in the policy document. They can be hard to read, so it pays to have someone check for you. If you conclude the insurer has acted in bad faith, you can then consider ways to hold them to account.