How To Tell If Your Insurer Is Engaging in Bad Faith Practices

Published on June 18, 2024, by Law Office of Matthew L. Sharp

Insurance Bad Faith

You received an explanation of benefits (EOB) from your insurer, much like one described by the Centers for Medicare and Medicaid Services, denying your health insurance claim that a medical provider sent in, and now you are expected to pay for that costly medical procedure. Or, your Nevada home sustained damage, and you were expecting your homeowners’ insurance to cover those costly repairs, but now, it doesn’t appear that they’re going to. There are just two examples where an insurance company may say that what you’ve filed a claim for isn’t covered by your policy.

There are countless scenarios involving other types of insurers that can play out much like the situations described above. While insurance companies may sometimes be justified in their handling of claims, including denying them, in other cases, what they may be doing is illegal. Below, we’ll discuss how to tell if your insurer is engaging in bad faith practices.

Common Examples of Bad Faith Tactics Insurance Companies Use

The illegal tricks insurance companies use may vary by the type of carrier, but some common examples of these practices include:

  • Offering lower payouts than what they were supposed to per plan benefits disclosures or because they assigned a depreciated value to a piece of property
  • Misrepresenting insurance policy terms regarding coverage
  • Failing to reach a fair, timely settlement when liability is clear
  • Arbitrarily denying a claim without adequately investigating the circumstances and/or requesting additional documentation to render a decision
  • Delaying or denying payment of claims that should be paid

Why Do Insurance Companies Act Unlawfully When Processing Claims?

If you’re wondering why bad faith insurance tactics are employed, it mostly comes down to money. This is what goes through adjusters’ and their higher-ups’ minds when they utilize some of the approaches discussed above:

  • Denying your claim without even reviewing it with the expectation that you’ll take that response as their “final word” and not appeal it
  • By delaying in responding to a claim or sending a settlement check, perhaps the claimant will “forget” about it, and we won’t have to pay anything
  • If we at least offer a settlement, albeit a low-ball one, we’ll keep our payout low and at least look like we’re acting in good faith since we made an offer to settle the claim

We’re sure there are many more thoughts that go through insurance companies’ minds when acting in bad faith, but the above gives you some ideas as to why they do what they do.

Compensation You May Be Eligible To Receive If You Can Prove an Insurer Acted Illegally

Insurers may end up needing to pay significant damages to those they victimize with their unethical and unlawful tactics like:

  • Contract damages: This describes the amount an insurance company actually owes an insured, for example, the amount someone with a health insurance plan should have been reimbursed had it not been for their insurer denying their claim. The claimant would be able to recover both principal and interest in this instance.
  • Extracontractual damages: These are costs for the additional impacts a claimant suffered because an insurer acted in bad faith. This includes financial losses, which, for example, may be any interest the affected party incurred by having to take a loan to pay their medical expenses since their insurer initially denied their claim. Additionally, these types of damages may include emotional distress and other types of noneconomic losses they sustained from having to deal with the bad faith issue. Attorney’s fees may also fall into this category of damages.
  • Punitive damages: As the name suggests, these types of damages are often imposed as punishment for wrongdoing and to discourage insurers from attempting to carry out the same negligent actions in the future.

Why Bring in an Attorney To Help With Your Insurance Dispute?

It doesn’t look good when insurers engage in bad faith. They may be brought into an administrative hearing, have fines imposed upon them for acting illegally, be ordered to repay you for your losses, and could even lose their license to offer services in Nevada if their impropriety is serious enough.

At the Law Office of Matthew L. Sharp, we believe that the best way to keep parties honest is by holding them accountable for their wrongdoing. If an insurer has done bad by you, we can not only potentially help you secure the coverage you were entitled to but also recover the losses associated with the handling of your original claim.

Meeting with a bad faith insurance attorney in our Reno office is completely free, so reach out to us to discuss your case and gain a better perspective as to your rights.