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."
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:
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.
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:
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.
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.
Last Modified: 10-28-2011 02:43 PM PDTLaw Library Disclaimer
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