The relationship between an insurance company and its customer is one of trust and dependence. The customer trusts that the insurance company to whom he has paid premiums will make good on its promise to cover the customer if there is an accident or a loss. When people make a claim on their insurance policy, there are often at a vulnerable time, and depend on the insurance company delivering on its promise to pay. Too often, insurance companies take advantage of the vulnerability of their customers and refuse to pay the full value of the claim, and leave their customers in a lurch, hoping to force the customer to take less than full value on the claim and thereby save money for the insurance company.
There are two main kinds of bad faith claims:
First party bad faith claims - this is where the customer has themselves suffered a loss that they are looking to the insurer to pay, but the claim is being wrongfully delayed or denied. First party claims might include:
Fire insurance
Homeowner's insurance
Life insurance
Health insurance
Third party bad faith claims - this is where a liability claim is being made against the customer by some third person, but the insurer refuses to settle the claim, resulting a verdict against the customer for more money than the customer has in coverage, resulting in personal liability for the customer for the balance.
When an insurance company is shown to be guilty of bad faith, depending on the state, they can be held liable for damages, including the full amount of the claim, any additional damages from the delay in paying the claim, damages for emotional distress, and punitive damages.
The accusation that the insurance company is failing to pay the claim because of bad faith is essentially one that the insurance company is cheating the customer. This is an accusation which insurance companies take very seriously and defend to the end. Hiring aggressive, well-qualified counsel is the only way to assure that you get the coverage you paid for.
