If you've been injured as a result of someone's negligence, and you've decided to handle your own claim, at some point you'll have to negotiate with an insurance claims adjuster.
Settlement negotiations can be tricky, and if you're not careful, you can be taken advantage of. To protect yourself against unscrupulous claims adjusters, you need to know the difference between good faith and bad faith negotiating tactics.
Claims adjusters are employed by insurance companies to process claims. Their job is:
Some claims adjusters will do just about anything to avoid paying a claim. Adjusters receive education in claim evaluation techniques. For victims, "claim evaluation techniques," translates to "minimizing payment and denying claims." Only when their insured's fault is undeniable do adjusters negotiate with a victim in earnest.
In personal injury claims, there's a fine line between negotiating in good faith and bad faith. Bad faith denial of claims is illegal. It's punishable by substantial fines and punitive damages. These amounts can run into the hundreds of thousands, and sometimes millions of dollars.
Bad faith negotiating occurs:
Every state has laws addressing bad faith insurance practices. These laws are found in the state insurance codes and regulations. You can find a copy of your state's insurance codes in your county court's law library. Some states now publish their insurance codes online.
Courts have traditionally held that insurance companies must have systems for their adjusters to rely on when evaluating personal injury claims. Each company has their own official standards, which never include acting in bad faith. Unfortunately, what goes on in the day-to-day functioning of the company may be different.
There's no checklist you can use to determine if your adjuster is acting in bad faith, but reviewing some common bad faith tactics may help you understand what to look out for.
Examples of bad faith tactics:
Adjusters go into a negotiation knowing the maximum settlement amount the insurance company has set aside for that particular claim. This is referred to as the "reserve."
The reserve is determined by a computer program. Based on the relevant facts, the program comes up with a maximum and minimum settlement amount for a specific claim. That money is then set aside. The suggested amounts are based on thousands of previous settlements and court awards.
The difference between the maximum and minimum amount is what the claims adjuster has to negotiate with. The closer he settles a claim to the minimum, the more money he saves the company. The more he saves the company, the more successful his career will be.
Some adjusters take advantage of the amount they have to negotiate with. In an effort to better their careers, these adjusters will do just about anything to settle a claim for the lowest amount possible. That's okay if the adjuster persuades the claimant based on truth and fairness. But when he relies on untruths and illegal manipulation, he crosses the line into bad faith.
If you believe your adjuster is acting in bad faith, you have the right to file a complaint and/or lawsuit against the insurance company...but it's best not to start there. First you should present your complaint to a supervisor.
Make a list of the reasons why you think the claims adjuster is negotiating in bad faith. Then ask to speak with the adjuster's supervisor. Don't begin the conversation by threatening to file a lawsuit, or making any other threats. You'll likely come across as a disgruntled claimant, and won't be taken seriously.
Tell the supervisor the following:
You want the supervisor to take your call seriously, so try to gather as much proof of the bad faith dealings as possible. Take good notes, and, if possible, record your conversations. If the supervisor believes your allegations are true, she can force the adjuster to stop the bad faith tactics, or transfer your case to a different adjuster.
Follow up your discussion by sending a certified letter to the supervisor, with a copy to the adjuster. The letter should confirm the date and time of your previous telephone call, and summarize the conversation. In a separate paragraph, restate the reasons you believe the adjuster has been acting in bad faith.
Complete the letter by saying you hope the adjuster and the insurance company will begin to fairly negotiate your claim, but if they don't, you will seek legal representation.
If the insurance company continues to act in bad faith, you should file a complaint with your state insurance board. Each state has such a board, although the official names may vary. Find your state's insurance board at the National Association of Insurance Commissioners' website, NAIC.org. Each board has their own procedure for reporting bad faith.
Once you file a written complaint, they will start an investigation. If the board's investigator finds evidence of bad faith, the state can levy fines against the company and take other punitive actions. Unfortunately, state boards can't order insurance companies to pay specific claims.
If you've been negotiating your own claim with an insurance company, and they continue to act in bad faith, speak to an attorney as soon as possible. Bad faith lawsuits are complicated, and you won't be able to pursue a case against the company yourself.
Insurance companies don't like bad faith lawsuits. They're costly to defend, and can result in huge jury verdicts. Most state insurance laws permit the courts to assess unlimited amounts of punitive damages against insurance companies for bad faith practices.
Bad Faith Breach of Contract
In the course of this lawsuit, the plaintiff asserts the defendant insurance company denied her claim in bad faith, constituting breach of contract. She is awarded punitive damages by the Court.
Lawsuit for Denial of Coverage
In this court case, the plaintiff is represented by a bad faith attorney. She is seeking damages for denial of insurance coverage, and is also seeking punitive damages. The Court's decision is split.
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