According to Woody Allen, “There are worst things in life than death. Have you ever spent an evening with an insurance agent?” Yes, insurance agents and insurance companies often get a bad wrap. This is because many insureds, or persons covered by insurance, believe they are unfairly dealt with when they submit a claim under their policy.
Unfair denials, poor settlement amounts, and lack of communication are just a few complaints many of us have when we are forced to deal with insurance carriers. In this light, the term “bad faith” may sound like a perfect phrase to use when discussing an insurer. But, bad faith actually refers to a cause of action an insured may have if his insurance company wrongfully denies a claim. Let’s look further.
Insurance Bad Faith
Washington law states that an insurance company cannot deny a claim for false or bogus reasons. Rather, insurance carriers have a duty to basically treat others the way they themselves would like to be treated. Or, they must give the same considerations to the interests of their insureds as they do their own interests.
For example, the law imposes several duties upon insurance companies. Some of these require insurers to:
- Carefully investigate a claim
- Conform to specific rules when settling a claim
- Make payment, for valid claims, in a reasonably timely manner
- Provide specific reasoning as to why a claim is denied
When an insurance company fails to abide by these duties, the law says they’re acting in bad faith. If an insurer acts in bad faith, the insured may file a legally valid bad faith claim. If successful, the claim can recover: the benefits under an insurance policy, emotional damage, and/or attorney’s fees and costs.
Claim Denial v. Bad Faith
It’s important to note that there is a difference between an insurer simply denying a claim and an insurer acting in bad faith. The best way to describe this is by means of an example. Let’s assume you’re involved in an automobile accident and damage the bumper on your car. You take the vehicle to a repair shop and spend $250 to repair the bumper. You then file a claim with your auto insurance company for reimbursement of the $250. Provided that your insurance company is acting in good faith, they can deny the claim for various reasons. This is basically a claim denial and it’s perfectly legal…assuming the insurer is acting in good faith.
A bad faith claim kicks in when the insurer engages in flagrantly wrongful conduct. In our example, assume the insurance company denies your claim after throwing your claim, and all supporting documents, into the garbage without even a simple review. This is acting in bad faith and you can bring a bad faith claim against the insurance company.
If successful, the claim is designed to punish the insurance company for its wrongful acts. This means compensation is not limited to the amount of the bumper repair bill. Compensation can include additional monies (ultimately left for a jury to decide) that will vary from case to case depending on the specific nature of the insurer’s bad faith act.
Insurance Fair Conduct Act
The Insurance Fair Conduct Act (IFCA) is a piece of Washington legislation that codifies much of the State’s insurance bad faith laws. It’s important to highlight a few details on the IFCA. These include:
- It only applies to claims a policyholder makes with his own insurance company.
- It does not apply to health insurance companies.
- Despite the last point, the IFCA does apply to other types of insurance policies that include medical costs (e.g., auto and homeowner polices).
The Phillips Law Firm Knows Insurance
Our firm has years of experience in handling insurance related claims. Our firm has also assisted numerous clients understand the myriad of complex insurance policies and provisions that flood the industry. Our passionate attorneys are ready to answer your questions and assist in your insurance related case. If you feel you have recently been a victim of an insurer’s bad faith acts, contact us today so we can help.