Reaping the Benefits of a Bad Faith Insurance Claims Denial

Reaping the Benefits of a Bad Faith Insurance Claims Denial

When an insurance claim is denied due to bad faith, the insured may be awarded substantial benefits to cover damages and punish the insurer for wrongdoing. Under Nevada law, insurance companies have a duty to their policyholders to act in good faith and provide fair services on all claims. When an insurer breaches that duty, the law considers that the insurer is acting in bad faith. If an insurance company denies a claimant’s benefits without reasonable explanation, the Nevada Supreme Court allows the claimant to file a bad faith claim or lawsuit against the insurance company. If the case is proven in court, the policyholder is entitled to recover the benefits for the claim designated under the policy’s limits, as well as other losses and financial damages incurred due to lost income from employment, emotional distress, and attorney fees. In some cases, punitive damages are also awarded.

Bad Faith Claim Denials

Recently in a California case, a court awarded substantial benefits to a homeowner who was denied insurance benefits for damages due to a burglary. When burglars broke into the home, they stole a variety of items and caused more than $100,000 in damages by filling the bathtub with water and leaving the tap on. The goal of leaving the water running was to short-circuit the security cameras in the home to cover their tracks and avoid arrest.

Due to extensive water damage, the homeowner, a single father with five children, was forced to find accommodations for his family for 14 months while repairs were being made. The homeowner filed a water damage claim with his insurance company, Ameriprise Insurance, but the claim was denied, so the homeowner filed a bad faith claim through attorneys for insurance claims. A Los Angeles Superior Court ordered Ameriprise Insurance Company to pay the homeowner more than $1.3 million for compensatory and punitive damages for refusing to honor the claim due to bad faith.

Nevada Bad Faith Claims

The Unfair Claims Settlement Practices Act (UCSPA), has established legal standards for proper investigation and settlement of claims for personal injuries that may arise while the policyholder is covered under certificates of insurance and insurance policies. Typically, the law applies to all insurance policies except policies related to workers compensation, equipment malfunction, fidelity coverage and surety bonds. This act protects against unfair behavior and claim settlement practices, and is enforced by individual state insurance departments.