When you purchase an insurance plan, your insurance company owes certain duties to you. Your insurance company must respond to a claim promptly, reasonably, and act in "good faith." In order to act in "good faith," your insurance company must comply with the "Covenant of Good Faith and Fair Dealing."
What Is the Covenant of Good Faith and Fair Dealing?
This covenant, or simply put the duty to act in good faith, requires that your insurance company act in certain ways when dealing with any claim you make. Your insurance company must:
- Respond to your claim (either denying it or paying it) within a reasonable time
- Cooperate with you regarding your claim (e.g., responding to your calls and inquiries within a reasonable time)
- Provide reasons for denying the claim in writing and specify what provisions of the policy they¿re relying on
- Attempt to find reasons for paying the claim as opposed to reasons for denying it
- Be "fair" towards you (this can include many other things)
In general, the duty of good faith requires your insurance company to thoroughly investigate your claim and consider all reasons that support your claim as opposed to simply looking for reasons to deny the claim. Your insurance company is not allowed to only consider its own financial interests (which would almost always favor denying the claim), but must also consider yours as well.
Do I Owe any Duties to my Insurance Company?
Just as your insurance company owes you a duty to act in good faith, you may have a duty to act in good faith towards your insurance company. Courts in many states have ruled that you (the insured) owe your insurance company a duty of good faith similar to the one they owe you. Your duty to your insurance company includes the following:
- Submitting your claims in a timely manner
- Providing all the information you are asked to give (as long as it is permitted under the policy and/or the law)
- Providing a statement under oath regarding your claimed loss , if the policy requires one
- Cooperating with your insurance company regarding your claimed loss (e.g., allowing them to examine the damage if you are involved in a car accident)
What Happens if my Insurance Company Breaches the Duty of Good Faith and Fair Dealing?
If you insurance company breaches this duty, then they are acting in "bad faith" and you can sue them. This duty is an implied duty (meaning it is not and need not be written into your policy) and it is up to your to ensure that your rights are not violated. So, if your insurance company acts in bad faith you can sue them for breach the implied covenant of good faith and fair dealing. If your insurance company is found to have acted in bad faith, you can receive damages in the amount of the claim and possibly punitive damages as well.
My Insurance Company Breached the Covenant of Good Faith and Fair Dealing, Do I Need a Lawyer?
An experienced insurance lawyer can help you determine whether or not your insurance company breached its duty to you. If you file a bad faith claim, a lawyer with experience in insurance law can represent you and help you deal with the complicated legal system.