Types of Insurance Bad Faith & How to Fight It

We pay our insurer because we would like to have some peace of mind. You expect that them to pay for the damages that are covered by your policy in the event that you are hurt in an accident. Unfortunately, things do not always unfold as they should and insurers sometimes unreasonably refuse to pay for a policy holder’s claim, or refuses to defend or protect a policy holder from the claims of others. When this occurs, that insurer is acting in bad faith. What can you do if this happens to you?

Continue reading to find out what options are available to you if you end up in a conflict with your insurer.

An Insurer’s Duties to a Policy Holder

Insurance companies are expected to fulfill a number of crucial duties to their policy holders and, when they fail to do so, you might have cause for action if they are acting in bad faith. Some of the duties of an insurance company include:

  • A duty to investigate: Insurers are required to conduct a proper investigation of a claim and to provide their findings as well as a valuation. If they fail to do this or create unreasonable delays, this might constitute as bad faith.
  • A duty to indemnify: When an insurer fails to pay a settlement agreement or judgment entered against the policy holder up to the limit of the coverage purchased, this is considered a failure to meet the duty of indemnification, which is an act of bad faith.
  • A duty to defend: Insurers who do not defend a policy holder against a claim, even when the lawsuit is not covered by the policy, is a failure of that insurance company’s duty to defend. An exception to this rule is when a policy explicitly includes the costs of a defense in calculating policy limits. However, in most situations, an insurer must cover all defense costs, no matter what the coverage limits are.
  • A duty to settle reasonably: In cases where a settlement would be more advantageous to the insured due to the fact that a lawsuit would expose them to damages that are beyond the limits of the policy, it is an insurer’s duty to settle reasonably.

Causes of Action

When an insurer acts in bad faith, the company can be sued. These of claims can usually proceed as one of both of the following types of cases:

  • Breach of contract: When an insurer refuses to uphold their end of an insurance agreement, this might be considered a breach of contract. Remember, an insurance agreement is a contract and an insured person pays premiums in return for insurance coverage, defense, and the monetary value of the policy payment. It should be upheld.
  • Tort: Under some circumstances, an insurer’s bad faith can be considered a tort, which is a civil wrong where a party causes the other harm.

It is important to distinguish between a breach of contract and tort actions since a tort claim can provide additional consequential punitive damages, which are often of a greater value than the policy itself.

St. Louis Insurance Bad Faith Attorney

When you purchase an insurance policy, you expect it to pay out if it is ever needed. Unfortunately, insurers often seek to limit or deny the rightful claims of policy holders. At DeFeo & Kolker, LLC, our St. Louis team of attorneys offer our clients experienced advocacy to effectively assist them in pursuing their rightful recovery. Do not hesitate to reach out to us!

Contact our office at (314) 684-8285 to schedule a free case evaluation with a knowledgeable member of our legal team.

Categories: Personal Injury