Insurance companies must act in “good faith” when handling claims, meaning they need to prioritize their policyholders’ best interests over profits. However, insurers don’t always meet this standard.
Many insurance providers engage in bad-faith practices to avoid paying claims.
Understanding their tactics is vital to protecting consumer rights and ensuring fair treatment.
At Ramos Law, we represent individuals who are victims of bad-faith insurance practices, and we’ll fight for the compensation you deserve. In this blog post, we dive into ten common ways insurers act in bad faith and offer practical advice on handling these situations.
1. Denying Claims Without a Valid Reason
Insurance companies sometimes deny claims without giving a reasonable explanation. As a result, policyholders endure long, frustrating appeals processes.
In fact, according to a study from the American Association for Justice [1], some insurance companies deny claims without sufficient investigation because they know policyholders may not have the appropriate resources to challenge them.
Here’s what you can do: If your insurance company denies a claim without reason, contact a bad-faith insurance lawyer. Attorneys like Matthew Osborne at Ramos Law can review your policy and determine whether the denial was unjust.
2. Delaying Payment on Claims
Delaying claim processing can be a deliberate strategy by insurers to avoid timely payments to policyholders. This tactic can be particularly stressful if you’re relying on a settlement to pay for medical expenses or property repairs.
Did You Know? Nearly 25% of insurance complaints in the United States involve delays in claims processing [2].
Take the following steps:
- Document all communications between you and the insurance company.
- Consult an attorney if delays are excessive.
- The Consumer Law Division of Ramos Law will hold your insurer responsible for unnecessary delays and obtain the settlement you deserve.
3. Offering Unreasonably Low Settlements
Insurers may offer settlements far below the claim’s actual value, hoping the policyholder will accept it out of desperation or frustration. Lowball offers are prevalent in cases with significant medical bills or property damage.
You’re not alone. Don’t accept the first settlement offer from the insurance company without consulting an attorney. The bad faith insurance lawyers of Ramos Law will negotiate on your behalf to ensure you receive fair compensation.
4. Misinterpreting Policy Language
Insurance policies are known for their technical jargon, which can be challenging for non-experts to understand. Some companies intentionally misinterpret policy terms to reduce or deny claims.
Understanding is possible. Ask your consumer law attorney to review your policy’s language. At Ramos Law, we are adept at understanding and challenging unfair interpretations on behalf of our clients.
5. Failing to Investigate Claims Properly
By law, insurers are required to investigate every claim thoroughly. Unfortunately, however, some may conduct minimal or biased investigations to justify claim denials. For instance, the company may send an unqualified insurance adjuster to purposely undervalue the damages.
Follow these steps to protect yourself.
- Document damages with photos and videos.
- Keep all receipts and repair estimates.
- Retain any written reports from professionals who assess your damage.
Gather evidence, like photos and witness statements, and request a re-evaluation if you believe the initial investigation was inadequate. Our bad-faith insurance attorneys stand ready to assist you in these situations.
6. Withholding Critical Information from Policyholders
Sometimes, insurers withhold vital information about coverage or the claims process, making it difficult for policyholders to secure the compensation they’re entitled to.
Tip: Ask for written confirmation of all communications. If the insurer withholds information, it may be in bad faith.
7. Citing Exclusions Not Applicable to the Claim
Insurers may attempt to deny claims by citing exclusions that don’t apply to the situation or by stretching the policy terms to cover exclusions that weren’t initially intended.
For example, insurance companies sometimes cite “act of God” clauses or outdated exclusions to deny claims following natural disasters. However, an experienced lawyer – like those at Ramos Law – can dispute unfairly applied exclusions.
If this happens to you, don’t panic. Review your policy exclusions carefully. Our bad faith insurance attorneys can determine whether the exclusion applies and help you contest the denial if it doesn’t.
8. Blaming Policyholders for the Loss
Insurers often try to shift the blame onto policyholders to avoid paying claims, alleging that their negligence contributed to the loss. For instance, in auto insurance cases, they may state that the accident was partially the policyholder’s fault.
You have rights. Document your actions and all circumstances of the loss to counter this tactic. Legal counsel can also help prove you weren’t at fault.
9. Using High-Pressure Tactics to Settle Quickly
Insurance companies might pressure policyholders to settle claims swiftly, often by stressing the uncertainty or time-consuming nature of a dispute. As a result, policyholders can be stuck with inadequate settlements that don’t fully cover their losses.
Time is on your side. Take the time you need and consult our legal team before agreeing to a settlement. At Ramos Law, we help clients resist pressure schemes and secure fair compensation for their damages.
10. Demanding Unnecessary Documentation
Some companies may require policyholders to submit excessive documentation, creating unnecessary obstacles and delays. This tactic is all too common in health and disability claims, where insurance providers might repeatedly request additional medical records.
Don’t let irrelevant requests prevent a fair settlement. Keep organized records and comply with reasonable requests. If the insurer’s demands become excessive or unreasonable, consult our lawyers at Ramos Law.
Laws Protecting Policyholders Against Bad Faith Insurance Practices
Several laws in the United States protect consumers from bad-faith insurance practices. They hold companies accountable when they fail to act fairly and honestly. Understanding these laws empowers consumers like you to recognize when your rights may be violated and to seek legal counsel.
The Unfair Claims Settlement Practices Act (UCSPA)
The Unfair Claims Settlement Practices Act (UCSPA) is a model law created by the National Association of Insurance Commissioners (NAIC) that several states use to regulate insurance practices. The act includes specific guidelines that insurers must follow when handling claims:
- Prompt investigation and processing
- Providing reasonable explanations for denied claims
- Offering fair, equitable settlements for valid claims
- Avoiding unreasonably low settlement offers
Violations of the UCSPA can provide grounds for legal action against insurance providers, as failure to comply often constitutes bad faith.
Other Relevant Consumer Protection Laws
Several consumer protection laws exist at both the state and federal levels to protect policyholders. Relevant consumer protection statutes include those set by the Federal Trade Commission (FTC) for consumer fairness and transparency, as well as state insurance commissions that oversee complaints and regulate insurer practices.
How These Laws Help Policyholders
Laws like the UCSPA and relevant consumer protection statutes give policyholders powerful recourse tools. If an insurer fails to uphold its legal obligations, you could be entitled to compensation beyond your original claim, including damages, attorney fees, and other penalties.
If you suspect that your insurance company has acted in bad faith, possessing an understanding of these laws is your first step toward protection. At Ramos Law, our team of skilled consumer law attorneys, led by Matthew Osborne, navigates the complexities for you.
We’ll ensure your rights are upheld and that you receive the total benefits and compensation you deserve. Contact us today to discuss your situation and explore your options for holding the insurance companies accountable.
FAQs on Bad Faith Insurance Practices
What does “acting in bad faith” mean in insurance?
Acting in bad faith means that the insurer isn’t honoring its commitment to serve the policyholder’s best interests. Tactics may include unjustified denials, lowball settlement offers, or delays.
How can I tell if my insurer is acting in bad faith?
Common signs of bad faith insurance practices include unexplained claim denials, excessive delays, low settlements, policy misinterpretation, or high-pressure tactics. If you sense bad faith, consult the Consumer Law Division at Ramos Law. We specialize in insurance disputes and will protect your rights.
What are my rights if I believe my insurer acted in bad faith?
As a consumer, you have the right to challenge your insurance provider’s actions and, in some situations, pursue legal action for damages beyond your policy coverage. Skilled attorneys can help you navigate the legal process and explain your options.
How can a bad-faith insurance lawyer help me?
A bad-faith insurance lawyer, like those at Ramos Law, can help interpret your policy, identify unfair practices, and negotiate or litigate on your behalf to secure fair compensation. We’re here to ensure your rights are protected and will work tirelessly until we achieve the best possible outcome.
Can an insurance company act in bad faith without outright denying my claim?
Absolutely – bad faith doesn’t always mean an outright denial. Your insurer may act in bad faith by delaying your claim, offering an unreasonable settlement, or misrepresenting your policy terms to lower the amount they owe. While these actions don’t involve a formal denial, they can still have significant financial consequences.
What’s the difference between “first-party” and “third-party” bad faith claims?
First-party bad faith claims involve disputes between the insurance company and the policyholder (think auto or homeowners insurance). On the other hand, third-party bad faith claims arise when the insurer’s actions harm someone outside of the policyholder, such as the other drivers in an auto accident. Both claim types can be grounds for bad-faith lawsuits.
Does bad faith apply to insurance companies?
Unfortunately, yes. Life insurance is meant to provide security to families in the event of a policyholder’s death. However, some insurers place profits over people, engaging in bad-faith practices to deny or reduce payouts. Whether by manipulating policy language or asking vague questions during the application process, life insurance companies don’t always have your best interests in mind. Consult with an attorney if you suspect bad-faith practices from your life insurer.
Why Choose Ramos Law?
If you face potential bad faith practices from an insurance provider, you don’t have to endure it alone. Led by Matthew Osborne, Director of the Consumer Law Division at Ramos Law, our legal experts will fight for your rights as a policyholder.
We know the tactics insurers frequently use to avoid paying valid claims, and we have the experience and resources to hold them accountable.
Don’t let your insurer take advantage of you. Contact Ramos Law today for a complimentary consultation. Let us help you secure the compensation you rightfully deserve.