What is Bad Faith?
When you purchase an insurance policy you are attempting to purchase security for you, your family or your business. An insurance policy is both a written contract to compensate you for your damages as the result of a loss covered by the policy of insurance, as well as a legally recognized promise to act in good faith and in your best interests when you need it most.
If your insurance company engages in improper claims handling practices while adjusting your claim, contrary to generally recognized standards for claims handling claims in the industry and/or Florida law, the insurer is referred to as having acted in "bad faith." This is a basis for a lawsuit after you prevail in your original claim. Even a settlement by the insurer can be the basis of a claim against the insurer for bad faith.
Improper claims handling practices include an insurer's:
- refusal to thoroughly and/or properly investigate your claim in a timely manner;
- use of unreasonable stall tactics including a delay in payment of your claim, slow claims adjustment, or numerous requests for records without explaining the reasons therefore or the relevance of the materials requested;
- refusal to pay the full value of your claim;
- unreasonable claim denials;
- misrepresenting policy provisions or coverage when dealing with the insured;
- and unreasonable interpretation of policy language.
An insurer's rejection of a claim, or a dispute regarding a claim, is not always the result of bad faith by an insurer. An insurer, even when it is determined by a court to be wrong in its determination of coverage or damages, may be found to have a legitimate reason for taking its position, but that is not always the case. Frequently insurance companies, and their adjusters, place the interests of the insurance company before the interests of their insureds and these actions damage the insured.
Sometimes an insurance adjuster’s improper handling of an insurance claim is due solely to the claims processing guidelines imposed by the insurer itself. These are designed to decrease the insurer's costs and increase profits for the insurance company. When the insurer's claims processing guidelines are improper, adjusters may not have the authority or the ability to timely, properly and fairly process a claim. In this type of situations, and others when the insurer violates Florida law by utilizing unfair and deceptive claims practices, there may be a potential claim for punitive damages. Punitive damages are imposed by the court to punish the insurer for egregious actions, and the award of punitive damages are in excess of the insured's damages, suffered as a direct result of the insurer's actions.
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