Duty of Disclosure
Insurers have a number of fiduciary duties they must perform in order to comply with the industry's good faith and fair dealings standards. Among an insurer's fiduciary responsibilities is a duty of disclosure. Fiduciary duties mean that an insurance company and its representatives must act in a position of trust, good faith, responsibility, and candor on behalf of their policyholders. This means that a policyholder's interests must come before the interests of any other party, including the insurance company.
A duty of disclosure requires that insurance companies provide certain information to their prospective and current policy holders. A duty of disclosure requires that an insurer be forthright and honest in all transactions. A fiduciary's duty of disclosure is outlined in both federal and state laws. These laws describe exactly what type of information must be provided to an insured in order to comply with duty of disclosure standards. In general, any information that must be conveyed in order to ensure that all business is conducted in good faith falls under the duty of disclosure.
The duty of disclosure also relates to dispensing information in a timely manner. This entails that an insurer provide time sensitive information as soon as it becomes available so as to insure that the policyholder's interests are protected. This means that any changes to a policy, documentation requirement notifications (with regards to claims), and all other related matters be conveyed to the policyholder as they arise. And failure to do so may constitute a breech of fiduciary duty.
When an insurance company or any of its constituents fails in their duty of disclosure it is considered an act of bad faith that gives actionable cause to the policyholder to seek relief for any resulting losses. When an insurer breeches their duty of disclosure, the injured policyholder has the legal right to seek compensation for any losses suffered including denied or lost benefits, interest on financial losses, emotional distress, and more. When a failed duty of disclosure is willful or malicious, punitive damages may also be awarded in a bad faith legal case. Punitive damages are intended to punish the defendant for their bad faith duty of disclosure breech and to deter them and others from committing such acts in the future.
Insureds also have a duty of disclosure when they obtain insurance coverage. Policyholders are required, under duty of disclosure contract provisions, to be honest and forthright about those matters relevant to their insurance plan. Failure to meet duty of disclosure requirements may cause an insurance company to drop your plan or coverage. In more extreme cases, a failed duty of disclosure may even be considered fraudulent and punishable in the criminal courts.
A duty of disclosure requires that parties involved in insurance transactions be honest and open about the pertinent information related to a plan or policy. When an insurer breeches their duty of disclosure, the policyholder has the right to seek compensation for their losses in a bad faith duty of disclosure case.
To learn more about duty of disclosure responsibilities, please contact us to speak to a qualified and experienced attorney.
