It is common practice for individuals and businesses alike to purchase insurance agreements as a way of protecting themselves against future financial hardship should an unforeseen event have negative impact on their lives.
Policyholders who take out an insurance policy do so within the understanding that the insurance company will act in good faith and do their best to meet their own obligations when it is time to file a claim. Insurers that fail to follow through on their obligations will sometimes find that they are brought into question and are embroiled within insurance litigation.
The Types of Insurance Litigation
The subject behind a case of insurance litigation can vary somewhat widely. Sometimes, a case will be brought against an insurance company because they have shown allegedly ‘bad faith’. The term ‘bad faith’ refers to when the company has failed to make critical information known to the customer, or they have failed to properly investigate a claim within a timely manner. Bad faith is a term that is used quite commonly throughout case law.
The term can be used to describe an undue delay when it comes to handling claims, a company refusing to put adequate investigation into a claim, or refusing to defend a lawsuit properly. In some cases, bad faith may refer to threats that are made against the insured in an attempt to prevent them from claiming, or a refusal to make or convey a reasonable settlement offer.
Other lawsuits can center on other concepts, such as the denial of a perfectly valid claim, or an insurance policy provider offering the insured party significantly less money than their claim is actually worth. Refusing to settle or negotiate claims is also a common subject when it comes to insurance litigation.
Doing the Right Thing
Similarly to a claim of medical malpractice, the concept of insurance litigation is based on the understanding that an insurance company owes a certain standard of care to the customers that choose to take out a policy. As a valid insurance company, it should:
- Recognize its duty to defend a claim that is given under the terms of the policy.
- Recognize its duty of indemnification, to pay a judgment against the policyholder up to the limit of coverage.
- Provide benefits where coverage should be given according to the policy that the holder and the company agreed to.
In order for a policyholder to be eligible for an insurance litigation case, some sort of damage must be brought against them by the insurance company. For example, a policy holder may suffer some form of damage if the insurance company in question fails to offer a reasonable settlement for a valid claim. Further damage may arise if afterwards, the policyholder is then subject to judgment in excess of the limits of the policy.
Generally, state statutes will deal with the responsibility of the insurers when handling claims. Many states come with their own department for matters of insurance, which will be responsible when it comes to regulating how insurance companies throughout the state handle claims and deal with customers accordingly.
Beneficiaries, third-parties and policy holders have the right to file court action in the pursuit of damages when they believe that their insurance company has engaged in some manner of unfair or unreasonable practice regarding claims and coverage.
A Law Firm that can see through the Smoke
Many states actually have substantial penalties when it comes to dealing with insurance companies that violate the regulations set out for the settlement of claims. If you feel as though you could benefit from extra help or guidance in this area of law, get a hold of Makarem & Associates, a committed law firm in this domain. You can call us at310.312.0299 or email [email protected].