Learn to recognize when the insurance adjuster is negotiating your personal injury claim in bad faith, and what you can do about it.
Insurance companies settle injury claims every day. Most people with minor injury claims are capable of negotiating with the insurance company to get fair compensation without hiring a lawyer.
You expect the insurance adjuster to be fair, honest and work with you to reach a reasonable settlement agreement. But what if they’re dishonest, or won’t cooperate?
Most jurisdictions in the United States recognize what is called an “implied covenant of good faith and fair dealing,” meaning you have a legal right to expect fairness and honesty in negotiations and other business transactions.
Here’s where we help you recognize when the insurance adjuster crosses the line from being uncooperative to engaging in potentially unlawful bad faith negotiation practices.
Recognizing Bad Faith Negotiation Tactics
If you’ve been injured because of someone else’s negligence, you have a right to expect compensation for your injury-related expenses and losses.
After you’ve fully recovered from your injuries, you may decide to handle your insurance claim without a lawyer.
Dealing with the insurance adjuster’s negotiating style can be the hardest part of handling your own injury claim. Some adjusters are hard-nosed, rude, and make you jump through hoops while trying to satisfy their requirements, but they are still within the boundaries of “good faith” negotiations.
Some claims adjusters will do just about anything to avoid paying a claim. Maybe they’re trying to win a bonus for settling claims way below the upper “reserve” amount, meaning the amount of money the company set aside based on their calculation of your claim’s value.
When an unscrupulous adjuster engages in bad faith tactics instead of honestly negotiating a claim settlement, you may have grounds for legal action against the insurance company.
Common Bad Faith Tactics
In personal injury claims, there’s a fine line between negotiating in good faith and bad faith. Bad faith denial of claims is illegal.
Bad faith is when a person does something untrustworthy in a legal matter. For insurance claims, this might include:
- When the adjuster denies a claim for no apparent reason
- When the adjuster refuses to settle for an amount consistent with similar claims, and does so by twisting the facts of your claim
Courts have traditionally held that insurance companies must have systems for their adjusters to rely on when evaluating personal injury claims. Each company has its 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.
Each state has its own insurance company regulations, and each case of bad faith claim handling or negotiations is unique.
Examples of insurance adjuster bad faith practices include:
- Automatically denying coverage without investigating your claim
- Taking an unreasonable amount of time to determine if coverage was in effect at the time of your injury
- Ignoring your letters or telephone calls
- Refusing to negotiate with you after you’ve filed a legitimate claim
- Failing to pay or deny your claim within a reasonable time
- Refusing to negotiate a fair settlement when their insured’s liability is obvious
- Failing to provide a clear written explanation of the reasons for denying your claim
- Improperly citing laws as an excuse to minimize or deny your claim
- Changing adjusters solely to cause a delay once you’ve entered into negotiations
- Intentionally dragging out negotiations without settlement until the statute of limitations expires
- Using false or deliberately improper medical or legal terms to deny or minimize your claim
What To Do About Insurance Bad Faith
Your options for dealing with bad faith depends on where you are in the insurance claim process, how blatantly the adjuster is negotiating in bad faith, and your relationship with the insurance company.
Who Can File a Bad Faith Lawsuit?
When you bought your homeowner or auto insurance policy, you became the “party of the first part.” Any claims you file under your insurance policy are first-party claims. Examples of first-party insurance claims include those filed under your:
- Personal Injury Protection (PIP) coverage, typically in no-fault insurance states
- Uninsured or Underinsured Motorist (UIM) coverage
Your insurance company is the “party of the second part.”
If you’re injured in an accident caused by someone else and file a claim under the at-fault person’s insurance policy, you would be filing a third-party claim. It’s still a third party claim even if you both have policies with the same insurance company.
Many states only allow a legal “cause of action” for bad faith in connection with first-party claims. In other words, state laws only allow you to file a lawsuit against your insurance company for bad faith negotiations and other unfair insurance practices.
You might also have a first-party bad faith claim if you caused a car accident and are sued because your insurance carrier refused to settle the other person’s claim, especially if the other person wins a verdict above your policy limits.
Because the insurance company has a “duty to defend” your interests, by allowing you to get sued, they acted in bad faith.
That doesn’t mean you’re out of luck if you’re a third-party claimant and the at-fault party’s insurance company fails to negotiate in good faith. Many states allow third-party bad faith lawsuits, and those that don’t often provide other “remedies” for bad faith.
Whether you have a first or third-party claim, if you believe your adjuster is acting in bad faith, you may have the right to file a complaint or lawsuit against the insurance company – but it’s best not to start there. First, raise the issue with the adjuster’s supervisor.
Addressing Bad Faith with the Insurance Company
When you are handling an injury claim directly with the insurance company, you might be able to stop potential bad faith by sending a carefully worded letter to the adjuster’s supervisor.
Stick to the facts, without threats, name-calling, or complaints that the adjuster isn’t friendly. If you sound unprofessional or overly emotional, you won’t be taken seriously.
List the reasons why you think the claims adjuster is negotiating in bad faith. Be specific. For example, instead of saying the adjuster won’t make a fair offer, explain that the adjuster refuses to come off a low-ball settlement offer of $900 when your medical bills alone exceed $1,500.
Or, instead of saying the adjuster is making flimsy excuses, explain that the adjuster keeps saying they can’t authorize settlement until they get copies of your emergency room records, even though you sent them on three different occasions (list the dates).
Make it clear you’ve been negotiating in good faith, and state:
- You already submitted all the relevant documentation to support your claim
- You complied with every reasonable request the adjuster has made
- Cite any other 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 work with you in good faith to settle your injury claim, but if they don’t, you’ll seek legal representation.
Notify Your State Insurance Board
If the insurance company continues to act in bad faith, you can file a complaint with your state insurance department. Once you file a written complaint, they will start an investigation.
Some states have special administrative procedures to allow third-party complaints of bad faith against insurance companies, even when litigation is limited to policyholders.
Your state’s insurance department can help you sort out what qualifies as bad faith. If their investigation reveals evidence of bad faith, the state can levy fines against the company and take other punitive actions.
Consulting a Personal Injury Attorney
Insurance companies don’t like bad faith lawsuits. They’re costly to defend and can result in huge jury verdicts, not to mention damaging the company’s reputation. Most insurance companies will quickly rein in an adjuster before their questionable tactics put the company at risk.
There’s no reason to hold off contacting a personal injury attorney to discuss your options. Sometimes a letter from your attorney is all it takes to stop bad faith negotiation tricks and bring about a reasonable settlement.
Most injury attorneys don’t charge for their initial consultation. There’s no obligation, and it costs nothing to find out what an experienced attorney can do for you.
Video: Defend Against Bad Faith Negotiation Practices
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