What is Insurance Company Bad Faith?

When an insurance company enters into a contract with a policy holder, the contract is a legally-binding obligation of the insurance company to make payment in the event there is a “covered loss.”  A “covered loss” simply means the type of losses that are specified in the insurance policy, such as automobile damage and injuries that are sustained in an auto accident.

Under state law, insurance companies must pay damages for a covered loss to the insured within a reasonable time frame.  While insurance companies may ask for documentation to substantiate a claim, and otherwise investigate a claim, they must do so in good faith.  Insurance companies cannot fail to pay a claim for no good reason, or deny a claim without a reasonable basis to do so.

In some instances, especially when large claims are involved, unethical insurance companies will try to delay or avoid paying a claim, or pay an insured much less than what the insured is owed.  The insurance company may give the insured little choice other than to accept a very low payment or to hire an attorney to fight back.  Insurance companies know that some of the time, because of the cost involved, the insured will take the low offer rather than fight, and thus they will save by paying less money than they really owe.

When insurance companies fail to pay what they owe without a good faith basis for doing so, a claim of bad faith can be brought.  Bad faith judgments, sometimes including punitive damages, are designed to punish insurance companies for their wrongful refusal to pay when obligated to do so.  In other words, the purpose is to teach the insurance companies that bad faith conduct will not be tolerated.  The awards in bad faith claims can be substantial, depending upon the facts and circumstances surrounding the case. 

At Bache & Lynch, Attorney Bill Bache used to represent insurance companies, so we know how they work.  We are familiar with the claims processes used, as well as the reasons that insurance companies have to properly deny claims.  We know the tactics they sometimes use to avoid paying all they should pay on a claim. We use this knowledge to protect the rights of our clients, and to ensure that our clients are not convinced to take actions that are not in their best interests. 

When insurance companies won’t pay what they owe, we sue them on behalf of our clients.  We make sure they understand that our clients aren’t going to walk away for less than what they are entitled to. 

At Bache & Lynch, we’re here to represent your interests – not those of the insurance company.  Call us – we can help.