We buy insurance to protect ourselves from sudden financial hardships, like hospital bills and property damage that often coincide with accidents, illness, or an Act of God. Unfortunately, insurance is structured in a way that incentivizes insurance companies to minimize their payout to you in the event that you ever need to make a claim.
As a consumer, you have a right to good faith and fair dealing with your insurance company by virtue of the contract you signed with them. A company acting in bad faith might make an effort to renege on that contract or otherwise shirk their obligation to you. They might delay paying the money they owe, give you a low-ball offer, or pressure you into accepting unfair terms in order to receive a payout. When insurers act this way, they can be taken to task by an attorney who knows how to prove bad faith insurance.
What Is Bad Faith Insurance?
Bad faith in insurance is any effort by an insurance company to intimidate the consumer, misrepresent the facts, or otherwise lower the amount that they pay out through unethical means. Insurance companies essentially bank on most of their clients never making a claim for a payout. In this way, they can keep profit margins high. However, this does not mean that they have the right to haggle with you, make you jump through unnecessary hoops, or threaten or coerce you into accepting less than you may deserve.
Examples of Bad Faith Insurance Claims
Bad faith insurance claims are essentially breaches of contract. They occur when a company acts without honest, intelligent action or consideration of a valid claim. Examples of common bad faith insurance practices include:
- Intentional delays in claims processing: Delayed insurance payments are all too common. Wisconsin Statutes section 628.46 mandates that an insurer “shall promptly pay every insurance claim” once the provider has received a written notice of a covered loss. “Promptly” under the Wisconsin law typically means within 30 days. However, many insurers drag their heels, insist they need more information, or even overlook this statute as well as its interest penalty. These kinds of delays can be examples of acting in bad faith.
- Asking for too much information: Say you have a small business and carry insurance in the event of a theft or covered loss. Your business is robbed, but when you go to report the event and make use of your insurance, you are asked to testify under oath about the events that led to the robbery. Did you lock the doors? Are you sure you trust your employees? Did you have an inappropriate relationship with one of them, that led to their having a copy of the key? You might be worried about misremembering facts or feeling like you are under suspicion yourself. At this point, many people feel it’s simply not worth it and do not follow through on their claims. This is an example of how an insurance company might act in bad faith by acting overzealously.
- Expert shopping: Insurance companies must conduct a thorough investigation into the loss or accident associated with your claim. However, sometimes the expert who is called in may quote them an amount that the company would consider too expensive. In this case, insurance companies have been known to shop around for additional experts who will quote them a friendlier number, or who will conduct less diligent research into the events that led to your claim.
- Policy cancellation: An insurance company might claim that you missed a payment that led to your policy being canceled or otherwise try to renege on their agreement with falsified cancellations.
- Lowball settlements: An insurance company may offer you much less than your claim worth and even threaten to pay nothing unless you accept their lowball offer. Holding funds hostage like this works on many people because, after an accident, they feel they are at risk of losing everything. A homeowner who is offered only $7,000 for storm damage that will cost $17,000 to fix may very well accept because they feel this is the best they can get.
- Intimidation and deceptive practices: Some insurance adjusters will intentionally misrepresent the law in order to plant seeds of doubt in claimants. For example, an insurance adjuster might try to make you think that the health condition for which you are seeking coverage is not covered under the contract, while this could not be further from the truth. This is why many people turn to attorneys for help to make sure their interests are being adequately represented.
Can You Sue an Insurance Company For Bad Faith?
Corrupt insurance companies hold their policyholders hostage during some of the most vulnerable times in their lives. Acting this way is not without consequences. Section Ins 6.11(3) of the Wisconsin Administrative Code sets down examples of unfair methods and practices prohibited in the state and creates a general standard of “fair and equitable treatment” for policyholders. In other words, wronged policyholders have the right to sue insurance companies for bad faith and claim compensation for the harm suffered.
How To File a Bad Faith Insurance Claim
An attorney can help you file a bad faith insurance claim and seek damages. They will carefully review your policy and create a record of your signed documents, addendums, premium payments, and more. You will need to provide your bad faith insurance claim attorney with detailed records of all correspondence you have had with your insurer, including any written and verbal offers. A diligent and experienced lawyer will fight for your rights, ensuring your bad faith insurance claim is both timely and legally compelling.
What Is a Bad Faith Insurance Lawyer?
Insurance companies have the upper hand on their claimants, but bad faith insurance lawyers balance the scale with legal knowledge and aggressive negotiation tactics. They understand bad faith insurance law and have years of experience spotting unfair and deceptive practices that the average person might take as par for the course.
How To Prove Bad Faith In Court
A bad faith insurance attorney will first review the entire case and gather evidence to support your bad faith claim. Once the case reaches court, Wisconsin law requires the plaintiff to prove that:
- they suffered harm as a direct result of the insurer’s bad faith conduct, and
- the insurance company either knew or recklessly failed to know and prevent bad faith.
In addition, your lawyer will also try to prove that the insurer lacked a reasonable basis for its wrongful actions. Last but not least, an experienced bad faith attorney will efficiently quantify the financial and emotional harm caused due to the insurer’s actions and help you get the maximum possible damages from your claim.
How Much Is a Bad Faith Claim Worth?
Bad faith insurance settlement amounts vary depending on your policy as well as the value of your initial claim. In general, a successful case can be worth the total extent of your original claim plus the additional amount denied to you by the company’s actions, as well as the possibility of additional payments for punitive damages, attorney’s fees, and other costs associated with your case.
Hiring a Bad Faith Insurance Lawyer: Pros and Cons
Pros:
- Working with bad faith insurance claim lawyers can help you avoid common pitfalls and mistakes in the claims process. They can be on the lookout for additional actions that you may have missed that can add to the total amount of your final claim.
- Hiring a bad faith insurance attorney means that your paperwork will be filed on time and correctly, without you needing to pay attention to filing guidelines and local court structures.
- Your interests will be aggressively represented by a bad faith lawyer who is more than a match for the corporate attorneys that your insurance company has on retainer to protect their profits.
Cons:
- A bad faith insurance claim can take time. You may need to be prepared for a wait before you receive the total amount of your settlement.
Choosing the wrong attorney can cost you time and money. You need an experienced bad faith lawyer to ensure you don’t waste your valuable resources when you need them most.
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