Understanding Insurance Bad Faith

Understanding Insurance Bad Faith

Jun 14

We all know and accept that insurance companies are in business to make money, and they happen to do so by providing for a “rainy day.” It is a needed service for individuals and companies because you just never know when you will need it. It is essentially a betting game; we’re betting that we’ll need coverage and insurance companies are betting we won’t. In an ideal world, the chances are against us, but we’re okay with that because we’d rather be healthy and safe than justify the premiums we pay. However, when something bad happens it’s a good thing if we have insurance coverage for it, and insurance companies lose their bet.

Insurance companies count on the fact that only a small number of policyholders will make a claim, so they keep the bulk of the premiums for their bottom line. This is acceptable practice and perfectly legal.

However, when insurers go to any lengths to prevent policyholders from making a claim or minimize their payouts, they cross the line from smart business to bad faith. Insurance bad faith is a breach of the duty of care insurance companies owe their policyholders, which is basically really just to honor the terms of the policy. Insurers act in bad faith when they delay processing claims to an unreasonable degree, deny legitimate claims, or defend payout amounts that are not in accordance with the terms of the policy.

The language in insurance policies is often arcane and confusing, making sense only to actuaries and lawyers. Dallas, for example, is considered the most natural disaster prone city in Texas, affected by tornados more than any other in the state, and above the national average. It is more than likely that some residents have fallen victim to insurance bad faith, but because few people truly understand what their policies cover and their rights under the law, unscrupulous insurers get away with it.

If you are dissatisfied with the way you were treated by your insurer when you made a claim, talk with an experienced Dallas insurance bad faith lawyer. If you have an actionable case, your lawyer will advise you about your next step.