Bad Faith Lawsuits

The insurance industry is absolutely huge and makes astonishing profits on a yearly basis. In fact, there are approximately 6,000 insurance companies across the country, giving you an idea of just how massive their market happens to be. These companies’ annual revenue is referred to as “insurance premiums” and goes well over $1 trillion dollars every single year! Undeniably, the big boys in insurance make a killing at what they do! This is not new information to anyone who knows about the insurance industry, so when people hear about insurers who get involved in unethical behavior for the sake of making even bigger profits, they feel indignant about it and rightly so. 

Insurance is supposed to be something good for consumers; it is supposed to protect them from harm and make them feel secure if anything should happen to go wrong. People who want to blanket themselves against possible economic loss that can result from personal accidents, unexpected lawsuits, medical emergencies, and much more get insurance coverage expecting that it will be there when they most need it; and let’s face it, insurance is not exactly cheap no matter how many funny commercials insurance companies make to trick us into believing that it is. If insurance were cheap, insurance companies would not make so much money! Consumers choose to pay high insurance premiums because of the protection that insurance companies assure them they will have. 

Once that contract is signed, not only is the consumer responsible for paying his or her insurance premium on a timely basis, but the insurance company has certain responsibilities as well. The insurance company has to provide coverage, uphold the specific terms of the insurance policy, and ultimately pay for a claim that is expressly covered by the consumer’s policy. After all, this is the contract that both parties have entered into. It is actually quite simple and easy to comprehend.  Unfortunately, as a lot of policyholders come to realize once it is far too late, insurance companies sometimes fail to uphold their part of the bargain. Insurance companies have been known to play dirty when it’s time to pay for claims that are completely valid so that they do not have to pay policyholders what is rightfully theirs. There are quite a few underhanded tricks that insurance companies will use to outright rob policyholders of their money such as misinterpreting the fine details of the insurance policy, lying, delaying the process, making unreasonable demands of proof, and much more. Insurance companies operate under an implied duty of good faith that they are breaking when they employ these deceptive tactics to save themselves money and policyholders can pursue a bad-faith lawsuit in response. Legal counsel from an experienced bad faith attorney will be essential for the lawsuit to be successful.

Different Types of Bad Faith

When it comes to bad faith that involves insurance companies there are two different types that often occur: bad faith issues with first-party insurance claims or third-party bad faith.

First-Party Insurance Bad Faith Cases

First-party bad faith occurs when a policyholder contacts his insurance company with a valid claim but the insurance company delays the process unjustifiable or outright denies the claim without a reason to do so. 

These are two tactics that are routinely employed so that policies do not have to be paid. For example, a homeowner whose home has suffered extensive damage due to one of many possible reasons will contact his or her insurance company to file a claim only to be told that a proper investigation must ensue in order to collect all possible evidence. The homeowner is told to await the investigation but that investigation never materializes. In the end, the claim is denied despite being valid. At this point, the homeowner should contact an experienced attorney and get advice about how to proceed with the situation. Most likely, a first-party insurance bad faith lawsuit will be filed against the insurance company.

Third-Party Insurance Bad Faith Cases

Third-party bad faith is a bit more complicated than first-party bad faith. There are three parties that must be carefully understood here. The first party is the person who happens to be insured; the second party is the insurance company that has sold one of their policies to the first party; the third party is someone else who ends up in the equation due to one of various reasons such as an accident. It is this third party who will initiate an insurance claim, most likely for liability. 

Imagine that you are driving late at night; you are tired and make a mistake that causes an accident. You hit another car and the driver is hurt as a direct result. That driver will most likely file an injury claim against your insurance company. There is no direct relation between the third party and your insurance company, allowing the third party to make claims that go beyond what your policy includes such as seeking compensation for medical bills, loss of wages due to being injured, as well as compensation for pain and suffering. This is a typical car accident injury lawsuit. 

There are quite a few things that can complicate matters when it comes to a third-party insurance bad faith lawsuit such as the insurer refusing to settle the matter or even not really being able to do so. Of course, every case is different and different insurers will respond in different ways to third-party insurance bad faith lawsuits.

Complications with Bad Faith Lawsuits

Nobody really likes lawsuits. For one thing, they are expensive and, for another, they tend to take a long time from the moment that they are filed until they are finally resolved. Lawsuits are mentally and emotionally exhausting for people who pursue them. Unfortunately, filing a lawsuit is often the only way to get greedy insurance companies to pay what they owe policyholders. Bad faith insurance lawsuits can get complicated and that is why they require the assistance of an experienced attorney who knows exactly what he or she is doing. If you believe that you are being unjustly denied a claim by your insurance company, you have to sit down with an attorney as soon as possible and go over the details in order to figure out the best possible way to proceed. If your attorney is able to prove that your insurance company has acted in bad faith, it will be held liable for damages above what the policy states and that includes statutory penalties, interest, attorney’s fees, punitive damages and much more.  

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By: Fred Geonetta

Frederick J. Geonetta is a graduate of the University of California, Hastings College of Law. His legal practice is entirely devoted to litigation. Mr. Geonetta has spent the past 25 years in private practice representing both plaintiffs and defendants who have been harmed or wronged by the actions of others or who have been falsely accused of causing harm to others. He represents clients across the U.S. and international clients who seek U.S. legal advice or representation.