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Insurance bad faith when your insurance company wrongly prolongs an investigation to delay making payment, or wrongly offers less than is owed, or wrongly denies paying a covered claim. Bad faith can also occur if your insurance company refuses to defend you if you are sued, or if your insurance company refuses to pay for a covered judgment against you.

Your insurance company owes you (as the policy holder) a duty of good faith and fair dealing. This includes the duty to promptly investigate and pay all legitimate claims.

Sometimes insurance companies don’t handle your claim in good faith. When that happens, it is usually necessary for you to file a lawsuit against your insurance company to recover the insurance benefits that you are owed.

Examples of Insurance “Bad Faith”

A common example of insurance bad faith occurs with homeowner’s insurance claims. When you buy a homeowner’s insurance policy, you pay a premium while the insurance company promises to timely pay for any damage or loss to your covered property. When you have a fire or theft loss, your insurance company is contractually required to promptly investigate the claim, promptly determine whether the damage is covered, and promptly pay the right amount due under the policy.

Bad faith occurs when the insurance company delays payment of the claim by prolonging the investigation or by wrongly denying the claim. Bad faith can also occur if the insurance company pays less than what is actually owed.

If your insurance company acts in bad faith, then punitive damages and attorney fees may also be recoverable.

The duty to defend

Under most insurance policies your insurance company has a duty to defend you when you are sued. An insurance company can commit bad faith if it fails to provide you with a full and complete defense to a covered claim without a legitimate and arguable reason.

The Duty to indemnify/settle

Your insurance company has a duty to pay for damages and losses that are caused by your own negligence. The duty to indemnify exists only to the extent that the final judgment is for a covered act or omission. Insurance bad faith can occur if the insurance company wrongly refuses to pay a covered judgment.

Your insurance company also has a duty to make reasonable attempts to settle any covered claim. Insurance bad faith can occur if the insurance company wrongly fails to settle a covered claim thereby exposing you to an uncovered financial loss.

Do You Need a Lawyer?

If you have been sued, your insurance company should hire one of its lawyers to defend you in the lawsuit. The insurance policy specifically lets the insurance company pick your lawyer. In most situations, there is no problem with this situation. However, there are certain situations where you should retain your own lawyer.

If you have any concern about the skill, competence or loyalty of the lawyer hired by the insurance company, or if you have any concern that the amount of insurance may not be sufficient to cover all of the claims, you should retain your own lawyer who will put your interests first.

In certain situations you may also have the right to have your insurance company pay for a lawyer of your own choosing.

Experienced Insurance Lawyers

Our lawyers have the experience to handle the most complex insurance claims. To set up an initial consultation to discuss your specific insurance matter, contact us online or call 601-957-3101.