You can file a bad faith insurance claim when an insurer unreasonably denies your valid claim, delays payment, or offers less than the required amount.
When an insurance company unreasonably denies, delays, or underpays a valid claim, the policyholder may have grounds for a bad faith insurance claim. In these situations, the individual can seek compensation beyond the initial benefits.
Policyholders who feel wronged by their insurer’s conduct must understand the damages available. These damages not only compensate for financial losses but also hold companies accountable. Let’s explore the types that may be awarded in a bad-faith insurance lawsuit.
What Are Bad Faith Insurance Claims?
Claims for bad faith insurance come up when insurance companies fail to fulfill their duties to act honestly and fairly toward policyholders. Insurance contracts typically include an agreement of good faith and fair dealing on the insurer’s part. The insurer must process claims promptly, thoroughly, and reasonably. However, insurers may sometimes act in bad faith and violate these obligations in the following ways:
- Unreasonably denying a valid claim
- Delaying payment without justification
- Offering less than the claim’s worth
Bad faith conduct can occur in many forms, including ignoring evidence that supports a claim, failing to investigate properly, and misrepresenting policy terms. These actions can leave policyholders financially strained and emotionally distressed.
The policyholder may be entitled to more than the original claim amount when bad faith is proven. Courts may award extra damages for financial losses caused by the insurance company’s misconduct and other damages.
Filing a bad-faith insurance claim is a helpful way for individuals to hold insurers accountable and handle claim denials. These claims also ensure that they receive the full benefits they’re entitled to under the policy.
What Damages Are Available In Bad Faith Insurance Claims?
If an insurance company acts in bad faith, the law is usually on your side. In this situation, you can seek compensation in the form of contractual, extra-contractual, and punitive damages. Let’s discuss these three damages.
Contractual Damages
In bad faith insurance claims, contractual damages are the benefits originally owed under the insurance policy. These damages compensate for the amount the insurer should have paid if it had handled the claim properly. They form the foundation of a bad faith case and represent the financial loss directly linked to the insurer’s breach of contract.
Extra-Contractual Damages
Extra-contractual damages in bad faith claims go beyond the policy’s initial benefits. They compensate the policyholder for any additional losses caused by the insurance company’s misconduct, such as lost income, emotional distress, or legal expenses.
These damages address harm resulting from the insurer’s bad faith rather than the breach of contract itself. For instance, if the insurance company’s action forced someone into bankruptcy, these damages cover it.
Punitive Damages
Punitive damages in bad-faith insurance claims are awarded to punish the insurers for malicious conduct and prevent similar behavior in the future. These damages go beyond compensating the policyholder and are only granted when the insurance company’s actions are reckless, fraudulent, or intentional. Working with firms like Winer, Burritt, Scott & Jacobs, LLP, can help you recover fair compensation when filing a bad faith insurance claim.
Endnote
You can file a bad faith insurance claim when an insurer unreasonably denies your valid claim, delays payment, or offers less than the required amount. Courts can award contractual, extra-contractual, or punitive damages if the insurer is found wanting.
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