Insurance companies tend to have a distinct advantage in their relationships with policyholders. Therefore, they are generally expected to act in good faith when dealing with a customer. There are many ways that states define bad faith on the part of an insurance provider. However, as a general rule, there are two elements that must be shown to prove that an action was especially egregious. First, it must be shown that a valid claim was denied.
Furthermore, it must be shown that the reason for the denial was unreasonable. This will be determined by the facts in a given case such as failing to acknowledge a claim or not making payment in a timely manner. It is important to note that there is a difference between negligence and bad faith. Negligence in itself does not constitute bad faith on the part of an insurance company.
In certain situations, a policyholder could take an insurance company to court because it violated a state law. This would be referred to as a statutory claim, and it could help an individual obtain relief after an insurance company took a variety of different actions. For instance, a lawsuit could be filed if an insurer failed to investigate a claim before denying it. A statutory claim could also be made if an insurer failed to provide a reasonable basis for denying a claim.
Those who have had an insurance claim denied abruptly or without a sufficient reason may want to take legal action. Attorneys might help those who want to file bad faith insurance claims protect their rights. Legal counsel may also take steps such as reviewing an insurance policy or relevant state law to create an argument that may result in a favorable outcome in such a case.