What's a Bad Faith Insurance Lawsuit?

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What's a Bad Faith Insurance Lawsuit?

Bad faith lawsuits are often associated with insurance policy conduct towards the policyholder.

A policyholder pays premiums to the insurance policy. When it is time to pay on claims, the insurance policy may deny these claims without a good reason. If this occurs, the policyholder may have a legal claim against the insurance company.

Insurance Contracts: What Is the Good Faith Requirement?

In most states, insurance contracts contain an "implied covenant of good faith and fair dealing." The covenant is essentially a promise, or a duty, which the insurance policy owes to its policyholders.

Specifically, insurance companies owe a duty to abstain from any action that may injure the rights of policyholders to receive benefits under the insurance contract.

Good Faith and Fair Dealing Violations

Insurance bad faith is associated with violations of the duty to good faith and fair dealing. An insurance company must not engage in an unreasonable denial of benefits or an unreasonable delay in handling the claim of the insured party.

Insurance bad faith is also found when the insurance company performs conduct that is:

Breach of Contract vs. Insurance Bad Faith

When insurance benefits are denied because of a mistake, the policyholder can sue for breach of contract. When higher degrees of wrongful conduct are implicated (such as bad faith), a policyholder may also base his lawsuit on tort claims as well as on breach of contract claims.

The most important difference is that action in tort allow for the recovery of more damages than a simple breach of contract claim. In another words, policyholders may collect more than what is owed them under the insurance contract.

What Do I Need to Sue for Bad Faith?

To have a successful bad faith case against an insurance company, the policyholder may need to do the following:

Seeking Help from an Attorney

If you feel that your insurance has breached its covenant of good faith, you may need a qualified bad faith insurance lawyer. A lawyer can help ensure that the insurance company fully performs its contractual duties.

Consult a Lawyer - Present Your Case Now!
Last Modified: 08-24-2016 10:22 PM PDT

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