BAD FAITH AND WRONGFULLY DENIED
INSURANCE CLAIMS
An insurance company as many duties to its policyholders. First, it usually has a duty to defend a claim (or lawsuit) even if some or most of the lawsuit is not covered by the insurance policy. Second, it has a duty of idemnification, which is the duty to pay a judgment against the policyholder, up to the limit of coverage, but only if the judgment is for a covered act or omission. As a result, most insurance companies excercise a great deal of ocntrol over litigation. Third, the company has a duty to pay the claim for loss if it is covered under the policy.
Insurance bad faith refers to a claim that an insured person has against an insurance company for bad acts. Under the lwa of nearly eveyr U.S. jurisdiction, insurance companies owe a duty of good faith in dealing with the persons they insure. If they violate that obligation, many states (including North Carolina) allow the insured person (or "policyholder") to sue the insurance company. In some cases, the tort or the governing state statute allows punitive (to punish the company) against insurance companies as a mechanism to prevent future behavior.
Examples of bad faith include:
- delay in handling claims
- deliberately delaying payment
- inadequate investigation of a claim
- threats against you
- rude or unprofessional communications with you
- refusing to make a reasonable settlement offer
- making unreasonable interpretations of an insurance policy
- refusing to reimburse you entirely for your loss
- refusal to defend a lawsuit against you
- making misrepresentations to you about your policy
