Tips for Avoiding Bad Faith Claims
Lawsuits over bad faith and unfair claim settlement practices are important in protecting consumers. In order to better avoid having to file a bad faith claim, consumers must be aware of the terms of the policy and make sure claims are being handled properly. Insurance companies can low ball claimants or delay or deny claims that violate good faith, and consumers aware of the claim process will be able to better identify if instances of bad faith may have occurred.
There are some insurers that do not act in good faith and will frequently low ball or unreasonably delay or deny claims, which can go unnoticed if claimants are not paying attention. As a result, these insurers are cheating Americans out of money and are breaking contractual agreements. The ability to avoid bad faith claims in the future from occurring is partially remedied by the ability to file bad faith lawsuits. When an insurer is required to pay damages and attorney fees in addition to the amount of the claim, it penalizes insurers not practicing good faith and discourages them from continuing the disreputable practices in the future.
Some insurers have binding, pre-dispute arbitration clauses that threaten the rights of claimants. Arbitration was intended to allow for a quick resolution to solve disputes in an informal manner, but the use of arbitration clauses in the insurance industry has been used so that it protects them from bad faith suits. Depending on the state a claimant lives in there are different systems for overseeing insurance companies, with some states appearing to favor the interests of the insurance companies over policyholders.
Insurance companies have realized the ability for binding, pre-dispute arbitration clauses to prevent bad faith suits, and the cost to consumers is high. Since arbitration is not publicly subsidized like the court system, with filing arbitration cases and hourly arbitrator fees associated to high costs, claims that may have been declared in courts are abandoned. The arbitrator used can also approach the case with bias because of the potential for repeat business with the insurer and because many arbitration panels represent the industry.
The inability for consumers to recover small-scale overcharges in individual proceedings and the inability for consumers to access business records to prove their case unless the arbitrator grants access, unlike in a lawsuit, makes it very difficult for a favorable arbitration ruling. Since it is extremely difficult to contest an arbitration ruling, regardless of if the arbitrator ignored the law, insurers not punished for bad faith have no reason to stop the practices.
The need for reform to discourage insurers from bad faith will allow the establishment of a national standard for insurer conduct and hopefully better protect policyholders from suffering losses. Making sure all aspects of the policy are understood, consumers can help avoiding bad faith claims.
If
you would like more information on bad faith, please contact us to confer with a bad faith lawyer.
