Black's Law Dictionary defines bad faith as:
...the intentional failure by an insurer to perform the duty of good faith and fair dealing implied by law. Generally an insurer may be acting in bad faith when it refuses to pay a claim and:
- Has no reasonable basis for refusing to pay and has actual knowledge of that fact; or,
- Has intentionally failed to determine whether it had a reasonable basis for so refusing."
Although Black's definition is general, it serves as a good baseline for measuring bad faith dealings by an insurance company. For years, claims adjusters have walked a thin line between negotiating injury claims fairly and negotiating in bad faith. Adjusters too often cross the line by using settlement tactics considered shady or even illegal.
Fortunately, our legal system has safeguards that severely penalize insurance companies found to be acting in bad faith. Those penalties can include hundreds of thousands, or even millions of dollars in punitive damages.
If you are the victim of bad faith, you may not have the means to sue the insurance company. And if you do, you'll be challenging a giant corporation with high-powered attorneys. They can win simply by overwhelming you with depositions, motions, hearings, and enough paperwork to sink a ship.
Knowing ahead of time what tactics constitute bad faith will help keep negotiations in line, while moving your claim toward a fair settlement. The key is for you to know what constitutes bad faith and how to effectively deal with it.
Each state has its own laws defining when an insurance company is acting in bad faith. Those laws are based on statutes and common law. This means laws are written (statutory) and can also be interpreted by the courts (common law). Together these laws define what constitutes bad faith and impose fines and penalties against those caught using such tactics.
Claims adjusters receive continuing legal education in what constitutes bad faith. Although company regulations always prohibit bad faith dealings, the underlying philosophy is often, "If you're going to use bad faith tactics, don't get caught." If an adjuster does get caught, the company will stand on its written policies and deny any involvement.
From the very first time you speak with the adjuster, she will be testing you. She'll want to see how far she can push and what tactics she can get away with. Always keep in mind that your adjuster's job is to do whatever she can to settle your claim for as little as possible. That's how they advance their careers and increase their salaries.
Bad faith tactics come in many forms. Each adjuster molds her tactics to fit the victim and the claim itself. Listed below are some of the methods most frequently used by claims adjusters. The courts have already determined that these constitute bad faith.
Claims adjusters are not allowed to:
The negotiation process can extend over several weeks, months, or sometimes even years. You'll have time to think about the tactics your adjuster is using, and whether they constitute bad faith. As long as you keep in mind the statute of limitations in your state, you'll have plenty of time to deal with any bad faith tactics your adjuster may attempt.
Never let the statute of limitations period expire.
Once it does, you lose your right to file a lawsuit. If an adjuster is delaying your claim and the statute of limitations is pending, contact an attorney immediately to file a lawsuit. If you can't hire an attorney, file your own lawsuit.
When you file suit, the statute of limitations is "tolled." This means it's no longer relevant. Once a case is in the court system, the time frame to resolve the matter is basically unlimited.
Knowing what to look for is your best defense. If you believe the adjuster is employing bad faith tactics to minimize or deny your claim, protect yourself by demanding she put the reasons for her actions in writing.
If the adjuster doesn't comply with your demand for written confirmation, send her a certified letter, return receipt requested. In the letter, give the date of the conversation and what tactics you believe to be in bad faith. Also note your previous demand for written confirmation and her failure to comply.
Hopefully, your letter will force the adjuster to abandon the tactic. If she doesn't, you've created written evidence of her bad faith, which will be important if a lawsuit becomes necessary. Your letter sends a clear message that you won't tolerate inappropriate negotiation tactics.
You have a couple of options if your adjuster continues acting in bad faith after your written notification. The first is to contact your state insurance board. Each state has such a board, although the official names may vary. Find your state's insurance board on this map. Each board has a procedure for reporting anyone acting in bad faith.
Once you file your written complaint, an investigation is started. If the board's investigator finds evidence of bad faith, the state will notify the insurance company and instruct them to remedy the problem. If the company refuses, it can be fined. Unfortunately, state insurance boards can't order insurance companies to pay specific claims.
Your second option is to find an attorney to file a lawsuit on your behalf. If the attorney believes you were the victim of a bad faith denial, she may accept your claim on a contingent basis. If so, you won't have to pay her until and unless she wins your case.
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