Insurance companies have a range of duties to their policyholders, and you, as a paying customer, likely trust them to uphold their “end of the bargain” when you need them to fulfill their duties. Unfortunately, insurers do not always act in good faith and fail in their legal duties. In this article, we will discuss types of bad faith claims and insurance companies’ duties.
What Duties Do Insurers Owe Policyholders?
The duties of insurance companies can differ based on your specific policy terms, which is why you should review your contract and the terms of your agreement. In general, the most common duties insurers have include:
- The duty to defend. Insurers have the duty to defend policyholders if a claim is made against them; in some cases, your policy may have a limit as to the cost of defense or the type of lawsuit may not be covered by your policy. However, even if you are over your coverage limit, in most cases, they still have the duty to defend you.
- The duty to indemnify. Indemnity refers to the contractual obligation of a person/party to compensate another party because of their actions. If your insurer does not pay a settlement agreement that you entered (up to your coverage limit), they have acted in bad faith.
- The duty to investigate. When you file a claim, your insurer should conduct an investigation before making a decision concerning your claim. For instance, in a car accident, they should investigate the circumstances of the accident, conduct a valuation, etc.
When Might Someone Bring a Claim Forward?
Your insurer is legally required to act in “good faith” and abide by the terms of your contract with them. Bad faith insurance claims involve policyholders being unduly denied coverage or improperly protected by their insurer when they fail to honor their policy agreement. You might bring a bad faith insurance company claim forward if your insurer:
- Attempt to settle a claim with an altered application without the claimant’s consent
- Denies a claim after the contestability period because of a mistake on your application
- Dies a claim or policy benefit unreasonably
- Fails to provide a claimant with a valid reason for a claim denial
- Fails to respond to a claim in a reasonable amount of time or delay without a valid reason
- Fails to settle a claim after an agreement has been reached or when liability is clear
- Lies or mislead a claimant about how to file a claim or legal deadlines
- Lies to a claimant about their policy terms or relevant information
- Refuse to make a good faith effort
It is important to note that these are just a few examples of bad faith insurance-related issues. If you feel like you have been treated unjustly by your insurer after filing a claim for needed treatment, you should reach out to an attorney. You should also be aware that there may a valid or legitimate reasons that your claim is denied or the insurer is taking time before responding to your claim. For instance, an insurer may delay or deny a claim if they believe this is an instance of fraud, errors on your application nullify your claim, or there is a lack of coverage.
Examples of Bad Faith Insurance Claims
Here are some real-life examples of bad faith insurance claims.
- Proton therapy denial. Proton therapy (or proton beam therapy) is a type of radiation treatment used to help cancer patients. However, over 60% of patients seeking proton beam therapy have been denied coverage by their insurer even though their doctors believed this course of treatment was their best option. Recently, the family of Bill Eskew—who died in spring 2017 after suffering from lung cancer and the side effects of intensity-modulated radiation therapy—brought forward a claim on his behalf against their insurer after he was denied such treatment. They were awarded $200 million in an insurance payout from Sierra Health & Life. Sierra Health & Life (SHL) denied Bill’s claim for proton therapy, without a proper investigation, and he suffered severe damage to his esophagus because of the treatment he had to seek after the denial. SHL claimed their policy did not allow claimants to claim proton therapy for lung therapy. However, the decedent’s wife said she asked them about the terms of their policy and mentioned that her husband may need proton therapy if he was an eligible candidate.
- Settlement failure. While driving recklessly, a motorist crashed into a motorcyclist, which led to her receiving debilitating injuries. The driver was borrowing the car from a friend, who was insured and had bodily injury coverage. However, their insurer, GEICO, failed to reach a settlement. The victim/survivor’s husband filed a lawsuit against the driver and the owner of the car, and he won his settlement— $4.7 million against McNamara (the driver) and $474,00 against Warren (the car’s owner). Warren and McNamara filed a bad faith claim against GEICO claiming that the insurer delayed in reaching an agreement to pay the policy limit ($100,000) to the victim.
- Wrongful death insurance denial. Alaska Airlines faced a wrongful death lawsuit after a passenger fell down an airport escalator in their wheelchair. Alaska Airlines’ insurer was deemed to have acted in bad faith by violating consumer protection laws and their coverage policy by failing to defend Alaska Airlines in this lawsuit.
At Mathias Raphael PLLC Accident & Injury Lawyers, we offer clients personalized attention and are committed to helping clients achieve the best possible case results. To discuss your case with our qualified attorneys, call (214) 307-8387 or reach out to us online today.