You, as a policyholder, are owed certain duties by your insurance company. When your insurer fails to meet those duties, it is usually acting in bad faith. If you suffer injuries because of your insurance company’s bad faith acts, you may be entitled to compensation. Knowing how to prepare for an insurance bad faith claim can help ensure your case is successful.
What Is Insurance Bad Faith?
Bad faith is a term used when an insurer unreasonably refuses to pay your claim or refuses to defend and protect you from the claims of others properly. Insurance companies owe many important duties to their policyholders, and failure to do so may constitute such a violation. Significant duties include:
The Duty to Investigate
According to Nevada law, an insurer has a duty to investigate your claim. When investigating a claim, an insurer has a duty to diligently search for and consider evidence that supports your claimed loss. An insurer that fails to reasonably and in good faith deny payments to you without thoroughly investigating the grounds for denial is acting in bad faith.
The Duty to Indemnify
The insurer has a duty to pay a judgment up to the policy limits when the loss is covered by the policy. An insurer who fails to do so has failed to meet its duty of indemnification, which may constitute bad faith.
The Duty to Defend
When you report a potentially covered claim against you, the insurer is required to appoint and pay for defense counsel to defend you against the claim, unless you choose your own counsel. The duty to defend applies only to those lawsuits that could result in the insurance company paying a claim under the terms of the policy.
The Duty to Settle/Inform
The insurer has a duty to settle claims if it can do so reasonably for an amount at or below the policy limits. In addition, the Nevada Supreme Court has held that “if an insurer fails to adequately inform an insured of a known reasonable settlement opportunity, the insurer may breach its duty of good faith and fair dealing.”
What Are the Elements of an Insurance Bad Faith Claim?
It’s important to understand how to prove insurance bad faith because it can be tricky. You must demonstrate that:
- your claim is a “covered loss” under the insurance policy;
- the insurer is required to pay under the terms of your insurance contract (which, in Nevada, contains an implied covenant of good faith and fair dealing), and
- the insurer acted in bad faith.
To demonstrate the element of bad faith, you must prove that:
- the insurer had no valid reason to dispute coverage or deny benefits under the policy, and
- the insurer was aware of, or recklessly ignored, the fact that there was no reasonable basis for disputing coverage or denying benefits under the policy.
Therefore, establishing an insurance company’s bad faith in Nevada can be difficult because you must prove elements of both contract law and personal injury law.
Preparing for an Insurance Bad Faith Claim
Insurance bad faith is common, and insurers are hoping you won’t call them on it. You should challenge bad faith, and the following steps will guide you through how to prepare for an insurance bad faith claim.
Review Your Insurance Contract
You must first ensure that the insurance company has actually violated the policy. Go over the clauses to ensure that your claim is covered by the terms of your insurance policy. Read the fine print because there may be exemptions or exceptions of which you were unaware.
Gather Documents and Evidence
Keep a paper trail as evidence of the insurance company’s breach of contract. Gather all the documents, files, and pieces of evidence from all communications with the insurance company. Keep a detailed log of who you spoke with, the date, and the nature of the conversations. Include any photos you sent to the insurance company, as well as accident reports, receipts, estimates, and any other relevant evidence.
Document Claim Denial
You should keep all evidence of claim denial. Be aware that deceptive insurers may modify the original claim denial to try and demonstrate that it was fair. Document all your interactions with the insurance company, as well as their statements.
Appeal Your Claim Denial
If you receive notification that your claim has been denied, request that a supervisor review your claim and denial. When making a settlement offer or denial, insurance adjusters follow a strict set of rules and procedures, but errors do occur. If the supervisor does not reverse the denial, you can file a complaint with the Nevada insurance regulator.
Write a Demand Letter
Before a lawsuit or complaint is filed, you need to put your insurer on notice that you attempted to settle your claim, that you’re not going to accept the denial or the settlement offer, and that you will pursue legal action if it continues to deny your claim in bad faith. Do this by sending a demand letter detailing your claim.
File a Complaint with the Nevada Department of Insurance
The insurance company typically has 15 to 60 days to settle the claim. If they do not, you have the option of filing a complaint with the Nevada Department of Insurance. The department representative will likely attempt to settle the claim by mediating between the two parties.
If you go through this entire process and still don’t get a satisfactory resolution, you can file a bad faith lawsuit.
Do You Need to Hire a Bad Faith Insurance Attorney
There are numerous ways you can get recourse in bad faith insurance disputes. In most cases, filing your own bad faith claim against a large insurance company is not a good idea. The entire process will be much easier if you find the best bad faith insurance lawyer in Nevada. He or she can help you know how to prepare for an insurance bad faith claim, ensure you’re not being pushed around, corner the insurance carrier into settling, or take your case to court to get your claim accepted.