Protect Yourself from Bad Faith Insurance Companies

Horror stories about insurance companies that refuse to pay valid claims are nothing new. The most egregious firms are experts at denying and putting off claim payments, forcing customers to pay out of pocket for services that are supposed to be covered. Lawsuits against these so-called bad faith insurance companies are aimed at protecting the rights of clients and stopping illegal claim refusals and practices. How do you know if you are dealing with a bad faith insurance company? Watch for the signs. 

How It’s Supposed to Work

When you agree to purchase an insurance policy, you enter a contract that specifies coverage terms and conditions. Terms spell out deductible amounts, co-pays and other out-of-pocket charges you pay and the amount the insurance agrees to pay. Under the law in most states, insurance companies owe their clients a duty of good faith and fair dealing. It seems pretty straight-forward. Unfortunately, bad faith insurance companies skirt around the laws and leave customers in the lurch.

The Signs of Bad Faith

Initially, it’s difficult to spot a bad faith insurance company. Problems like losing paperwork and requiring you to fill out the same form multiple times seem more like an annoyance at first. Anyone can misplace a document. But if it happens again and again, watch out. Here are a few more tactics bad faith insurance companies use on unsuspecting policyholders:

● Offering a too low amount.

● Misrepresentation of coverage facts.

● Demanding disproportionate amounts of paperwork and documentation.

● Misinterpreting client medical records.

● Ignoring the advice of the service provider when the opinion results in payout.

● Not paying on time and forcing clients to pay out-of-pocket.

● Canceling the policy after a claim.

● Denying high-cost claims.

● Inadequate claim investigations.

In other words, bad faith insurance companies illegally deny valid claims.

The States Rule

Insurance laws are state-specific . Each state has its own statute or code governing the insurance industry. A state department is responsible for enforcing the code’s provisions and initiating proceedings against violators.

Bad Faith Insurance Companies and the Courts

Bad faith lawsuits in the United States sometimes result in large awards for punitive damages. Suits may take years to wind their way through the courts, however, particularly if they are dependent on underlying litigation. Appeals are also common.

Protect Yourself

if you suspect your insurance company is dragging its heels to pay out a claim and using bad faith tactics, document everything. Keep a log of every email, chat and phone call. Write down the names of the people you contact.

Notify the state insurance board if you continue to have problems. File a written complaint. The board will launch an investigation. If the state discovers evidence of bad faith, it can levy fines and administer other punitive actions. State boards cannot, however, force insurers to pay individual claims.

Finally, contact an attorney if the bad faith behavior continues.

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