What Are Bad Faith Insurance Practices & How Do They Affect Me?

We count on our insurance provider to be there when we need them the most. Whether we’ve just experienced a car accident, need emergency medical care, or have had our homes damaged by a natural disaster, we count on our insurance providers to be our safeguard from the unthinkable. People pay monthly premiums in return for a promise: if something terrible happens, the insurance company will take care of it. When tragedy strikes and it’s time to make an insurance claim, an insurance company should hold up their end of the deal. What happens when they don’t?

What Is Insurance Bad Faith?

Insurance companies need to be reliable. As the source of medical or disaster relief in an emergency, they're in a position of power over us. Because of this power, insurance companies are legally obligated to be honest and fair. In an ideal situation, an insurance company uses its knowledge and resources to provide the right amount of money that a claimant’s situation requires.

Unfortunately, insurance companies don’t always act in the interest of their policyholders. When an insurance company knowingly or deliberately delays or denies financial relief for a claim, that's called "insurance bad faith."

Bad faith practices include the following:

  • Low claim offers
  • Denying a valid claim
  • Failure to accomplish a thorough investigation
  • Deceptive practices
  • Twisting policy language
  • Threatening statements

Insurance companies have always been community funds, and limiting the size of payouts has always been necessary. Regardless, the first insurance companies were designed to serve the insured; once a claimant proved their need, insurers would provide. What's changed in the last 20 years, however, is that insurance companies are now publicly traded, which means their primary obligation is to serve the shareholder, not the insured. A profit-first approach has resulted in an industry riddled with deceptive or unfair practices.

How Does Insurance Bad Faith Affect Claimants?

In some instances, an insurance company might offer a low payment in hopes that a policyholder will accept it. Once this happens, an insurance company is released from its legal obligation to honor a claim. Or, insurers might delay or deny a claim in the hope that they’ll frustrate a policyholder to accept a lower payout. This is unfair because it preys on the vulnerability of a claimant during a financially stressful time.

In other instances, a person might lose out on the claim they deserve through an insurer’s failure to accomplish a thorough investigation. Since insurers are supposed to be the experts in a situation, an improper investigation is considered to be bad faith. Finally, insurers must be honest about a policy’s language and investigate every option the insured deserves under that policy. If they're caught using deceptive language or twisting a policy's coverage, they can be sued for bad faith.

In short, bad faith deprives people of financial stability and vital resources when they need them the most.

Bad Faith Claims in Louisiana

If you are struggling to obtain a fair settlement for your insurer, turn to Clayton, Frugé & Ward for help. We've spent decades helping residents of Louisiana fight for their rights. We're never intimidated by the tactics of insurance companies and will never be happy with less than a client deserves. Our millions of dollars in verdicts and settlements are evidence of his our dedication to winning results for clients. Contact us today; we’re ready to look at your claim and help you decide your next steps toward receiving the compensation that you need and deserve.

Our Louisiana insurance lawyers are ready to provide a free consultation when you call us right now at (225) 209-9943. We take calls 24/7 and only collect a fee if we win a case.