January 27, 2017

Suing an insurance company for bad faith

If you’re thinking of suing an insurance company for bad faith, it’s important that you understand what that means. You need to understand what services an insurance company is responsible for providing and how to know if they’re failing the expectations set. It’s understandable – we pay these companies hundreds of dollars a month and trust that when the going gets rough, they’ll be there for us. So what is a bad faith lawsuit, and how do you know if you should pursue one?

What does bad faith mean?

A bad faith lawsuit occurs after another attempted lawsuit. For example, say you’re involved in a major car accident, and file a claim with your insurance company. Once you’ve filed the claim, provided them with all the information they ask for, and essentially wait your turn in the queue, your insurance company is responsible for two things:

  1. Offering and providing a reasonable settlement
  2. Doing so in a timely manner

Essentially, the theory is that insurance companies have a duty to negotiate in good faith, and should settle claims in a timely manner for appropriate amounts.  If the insurance company does not settle when it should have settled, and the injured person goes to trial and the jury awards an amount greater than the insurance policy limits, the law might look to the insurance company and question why the insurance company made the person go to trial and failed to settle the case earlier.

What is a bad faith lawsuit?

A bad faith lawsuit is a separate lawsuit against an insurance company for not settling cases when they should settle them, and these bad faith lawsuits can often result in verdicts that are much higher than the underlying personal injury lawsuits.  This area of the law is intended to encourage insurance companies to “do the right thing” during settlement negotiations.  Specifically, once the insurance company has sufficient information to know it should pay the policy limits, the insurance company is required to pay the insurance limits to the injured person.  If the insurance company does not pay the insurance limits when it should have paid the limits, then the insurance company is said to have acted in bad faith, and is subject to a separate “bad faith” lawsuit for failing to pay a claim in a timely fashion.

Of course, the question then becomes, when and under what circumstances does an insurance company have enough information to pay the insurance limits on a claim?  And moreover, what constitutes a timely payment?  This is what an insured brings to the court to decide when suing an insurance company for bad faith, and hopefully force the insurance company’s hand in making a timely, reasonable decision.

If you find yourself in a position where you’re questioning the dependability of your insurance company, contact Corless Barfield for a free consultation.