UNITED STATES PUBLIC ADJUSTERS
Bad Faith Claim Practices
(aka Unfair Insurance Claim Practices)
The Insurance Industry has lobbied over the years to see that there is no federal agency which oversees the insurance industry, essentially leaving no federal law or enforcement to protect Insureds against Unfair Insurance Claims Practices. Currently this authority lays at the state level only.
Some states laws allow (some don’t) for judges to award attorney’s fees as well as punitive damages on behalf of the plaintiff suing an Insurance Company in a bad-faith insurance matter (an Insurer’s unreasonable withholding of insurance policy benefits). The importance in having the threat of punitive damages (in an amount sufficient enough to deter malicious, fraudulent or oppressive conduct) being awarded in bad faith cases is enormous as it is the only financial incentive for an Insurer to abide by fair dealing and acceptable good faith standards with Insureds. In the absence of the threat of punitive damages, financially, an Insurer is actually encouraged to engage in unfair claims practices.
The fact that each state has its own system for overseeing insurance companies poses a great problem for policyholders particularly in those states where recent legislative changes and court decisions favorable to the insurance industry may encourage bad faith conduct. Victims of insurance company unfair claims practices are badly in need of federal regulations that, if nothing more, would at least establish a minimum single uniform national standard of Insurer conduct.
In the absence of such a national standard, and according to varying standards independently set by each state, Unfair Insurance Claim Settlement Practices are generally defined as “if the Insurer knowingly commits or performs with such frequency as to indicate a general business practice” according to the following:
- Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
- Failing to acknowledge and act with reasonable promptness upon communications with respect to claims arising under insurance policies;
- Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
- Refusing to pay claims without conducting a reasonable investigation based upon all available information;
- Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
- Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
- Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
- Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
- Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;
- Making claims payments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made;
- Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
- Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
- Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;
- Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
- Using as a basis for cash settlement with a first party automobile insurance claimant an amount which is less than the amount which the insurer would pay if repairs were made unless such amount is agreed to by the insured or provided for by the insurance policy.