InsuranceThought — Blogs About Insurance

Although the point of paying expensive insurance premiums every month is obviously to keep ourselves protected should we fall ill or become injured, insurance companies, unfortunately will likely try to find an excuse not to pay a claim if and when you do need to make one. If your insurance company tries to wriggle its way out of paying your claim, they are engaging in what is known as “insurance bad faith.”

Insurance bad faith, according to a legal term that “describes a tort claim that an insured person may have against an insurance company for its bad acts” is the attempt to skirt the duty they have to pay a claim, implied by the fact that they accepted an individual’s premium in return for coverage. This duty is often referred to as the “implied covenant of good faith and fair dealing” which automatically exists by operation of law in every insurance contract. If an insurance company breaks this duty, it can be sued on a tort claim in addition to a standard breach of contract claim. The insurance company may then be liable for paying damages above and beyond the value of the policy because of bad faith.

Almost every type of insurance carrier has a legal duty to honor their agreements to pay policyholder claims. Types of insurance companies that are sued in bad faith often include: Health, Auto, Life, and Long-term disability.

To protect yourself from going through the ordeal of having to sue an insurance company in order for them to pay your claim, you should always check with the National Association of Insurance Commissioners (NAIC) to make sure the company with whom you’re insured is in good standing, both financially and legally.