How to Know When an Insurer Acts in Bad Faith

How to Know When an Insurer Acts in Bad FaithOne of the first steps in protecting an individual’s rights as an insured consumer is to recognize the signs of an insurance company’s bad faith acts. Nobody deserves to be left without the support of their insurance company when tragedy strikes, but it is all too common for victims to get the run around as insurance companies act in bad faith.

Fortunately, consumers can avoid becoming victims of bad faith practices by familiarizing themselves with unscrupulous acts and the tactics commonly used to achieve them.

What is Insurance Company Bad Faith?

Bad faith acts by insurance companies are illegal, and depending on the situation, they can be punishable by substantial fines and punitive damages that can add up to thousands and even millions of dollars. In Nevada, insurance companies have a duty to deal with their clients in good faith and fairness. When they do not, victims of bad faith may be eligible to collect financial compensation for damages. Examples of bad faith acts include:

  • Denying a claim for no apparent reason
  • Failing to settle a claim for an amount that is consistent with other, similar claims
  • Failing to process a claim in a timely manner
  • Manipulating laws to minimize or deny a claim

Recognizing Insurance Company Bad Faith Acts

There is no official checklist to determine when an insurance company is acting in bad faith, but the following actions are typically red flags consumers should watch out for.

Fast Claim Denial

When an insurance company fails to thoroughly investigate a claim and instead simply issues a denial for no apparent reason, it is likely an act of bad faith. In this type of situation, insurance companies often fail to provide victims with clear explanations for the denial, or they improperly cite laws or medical terms to justify a denial.

Processing Delays

Oftentimes, insurance companies will attempt to put off claims processing by changing claims processors once negotiations have begun, misquoting the statute of limitations, failing to communicate with victims within a reasonable time frame, or by using other tactics. When these companies fail to process a claim in a timely manner, a bad faith lawsuit may be in order.

Unfair Settlements

An insurance adjuster’s goal is to settle claims for the lowest amount possible, and some adjusters rely on unfair, manipulative and illegal measures to accomplish that goal. These acts cross the line and are considered acts of bad faith.