A Brief Explanation of Insurance Bad Faith
When dealing with any type of insurance company, it’s helpful to remember that these are for-profit organizations. Like any for-profit organization, insurance companies loathe to part with their profits by paying claims. The majority of insurance companies pay claims filed by clients in a timely manner as they understand their responsibilities to their clients, but some deliberately do not and can be found to be acting in bad faith.
A big part of their responsibilities is determined by whether a client’s claim is considered a “first party” claim or a “third party” claim. When a first party claim is filed, they are required to investigate any damage to the item that they have insured, decide whether the damage is covered by their policy, and pay their client fair market value for the damage. If the insurance company does not investigate or evaluate properly or fails to acknowledge that a claim has been filed, it can be determined that they are acting in bad faith.
For third party claims, they have two responsibilities to their clients and must be fulfill both of these in good faith.
- They have a duty to defend a claim or lawsuit even if a part or most of the lawsuit is not part of the insurance policy coverage. Unless an insurance policy is specifically structured so that the costs of defense are counted against policy limits, they must cover all the defense costs no matter what the coverage limit of the policy may be.
- They have a responsibility to pay for judgments against the policyholder up to the coverage limit, but this is only when the judgment is for an omission or covered act. The legal term for this is indemnification.
If the insurance company improperly refuses to defend a lawsuit or refuses to pay a judgment or settlement of a covered lawsuit, they can be found to be acting in bad faith.
As you might guess, these are very simplified examples. If you believe that your insurance company is acting in bad faith, you should speak with an experienced Los Angeles insurance bad faith lawyer such as Samer Habbas. Southern California insurance bad faith attorneys like Mr. Habbas can explain the laws that apply to your situation and determine whether you have a case. If you believe that you have a valid claim that your insurance company is failing to honor, call 888.848.5084 today to schedule a free consultation with California insurance bad faith lawyer Samer Habbas.
Resource link: A Brief Explanation of Insurance Bad Faith