August 11, 2016 Articles

Recognizing and Combating Bad-Faith Claim Tactics

A policyholder can maximize its insurance recovery by learning to identify the markers of insurance company bad faith

by Daniel J. Healy and Vivian C. Michael [1]

Getting a corporate insurance claim fully and promptly paid many times requires leverage. Too often, insurance companies drag their feet through the claims process, look for issues that delay resolution of a claim, and in the meantime, hold off payment. Insurance company methods sometimes cost policyholders time and money, and result in policyholders settling for less than their insurance claim may be worth. Policyholders can avail themselves of bad-faith law to deter this conduct and, if necessary, recover the additional damages it can cause.

Overzealous use of claim scrutiny can rise to the level of bad faith. Because insurance companies have claims departments specifically designed to investigate claims, they are well equipped to exploit the facts and issues involved in a given claim. Insurance companies should not be able to leverage their experience and resources to the detriment of their policyholders, who seek coverage after having suffered a loss and at a time when they need the value of their insurance coverage. Insurance companies should base their analysis of a claim on the merits of that claim. If they do not and instead take unreasonable positions, delay payment, or limit coverage, that type of conduct may well constitute bad faith for which they can be held accountable.

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