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Frequently Asked Questions about Bad Faith Insurance

When you are faced with a bad faith denial of an insurance claim, working closely with an attorney who will explain clearly all rights, options and consequences can help to ensure that you make decisions that are in your best interests. Contact our firm today to schedule a consultation and case evaluation with an experienced attorney.

Answers to Your Bad Faith Questions

Do you think that you may have an insurance bad faith claim? If your insurance company is not providing you with the protection you deserve, it is time to talk to an experienced lawyer. At the The LePley Law Firm, our attorneys protect the rights of insurance bad faith victims across Washington. We can answer your questions and help you evaluate your options today.

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Frequently Asked Questions About Bad Faith Insurance Claims

Q: What does bad faith mean in the insurance context?

A: There is really no standard definition of bad faith, but most states define it as unreasonable or unfair conduct by an insurance company. There are a number of actions by an insurer that are considered bad faith by the courts.

Q: Can an insurer wait until litigation begins to defend its insured?

A: No. An insurer’s duty to defend is assessed at the outset of a case. If it is subsequently determined that there was no coverage at the time of the incident giving rise to the claim, an insurer may withdraw from representation.

Q: What are some examples of conduct that are considered bad faith?

A: The following actions by an insurer are considered bad faith: the unreasonable denial of a claim; inadequate or improper claim investigation; delay in payment; deception; misrepresentation of coverage to avoid paying an otherwise valid claim; conditioning payment of an undisputed portion of a claim on settlement of a disputed portion; failure to communicate; making oppressive demands on the insured; wrongful cancellation or nonrenewal of policy; unfair imposition of higher premiums for filing a claim; and exploitation of the insured’s vulnerable position.

Q: What is a statute of limitations?

A: A statute of limitations is the time period in which a formal claim must be filed. These time limitations typically vary by subject matter and by jurisdiction, and are set by state law. However, keep in mind that an insurance policy may have its own contractual time frame that requires a claim or lawsuit be filed within a given time that may differ from state law.

Q: How important is the information in an insurance application?

A: You are responsible for information you supply in an insurance application and will likely answer many questions from a sales agent when applying for a policy. You are responsible for the information on the application; make sure that your answers are true and accurate. Do not allow an agent to rephrase your answers in his or her own words. Any dishonesty or deceit can be used against you to deny your claims or cancel your policy, depending on the policy contract language.

Q: How can I avoid having my insurance claim denied?

A: An insurer has the right to deny a claim if the insured fails to uphold his or her obligations under the policy, if a claim is for something not covered by the policy or if the insured makes a fraudulent claim. To avoid wrongful denial of a claim, an insured should: immediately notify the insurance agent if there is a covered loss; review the policy to identify the relevant language; document telephone calls; keep all records that relate to the claim if there are questions about coverage; and submit the claim promptly.

Q: What is a claim file?

A: A claim file includes all of the insurer’s documents and notes regarding your claim. The claim file can be a critical piece of evidence for an insured who institutes a bad faith lawsuit against the insurer because it may contain evidence that the insurance adjuster did not follow proper procedures or acted unreasonably in denying the claim.

Q: What is a duty to defend and how is it triggered?

A: A duty to defend is an insurer’s responsibility to provide legal representation to an insured in a lawsuit that seeks damages within the scope of insurance policy coverage. For example, if an insured causes a car accident that injures a third party and that third party sues the insured, the insurer may have a duty to defend the insured in that lawsuit, as set forth in the policy. If the insurer learns of facts, from any source, which would trigger coverage, a duty to defend exists.

Q: What damages are recoverable for an insurer’s bad faith?

A: If an insurer breaches its duty to act in good faith when handling an insurance claim, the insured may recover any damages proximately caused by the breach. Typical damages in a bad faith action include the benefits of the policy and consequential losses and damages suffered due to claim denial. Depending on the state, if a court finds that the insurer acted with extreme misconduct, the insured might also be able to recover punitive damages, attorneys’ fees and prejudgment interest.

Q: What is reverse bad faith?

A: Reverse bad faith is an action for affirmative relief raised by the insurer in either a complaint or counterclaim. The insurer alleges that the insured acted in bad faith and thereby caused losses to the insurer. The tort of reverse bad faith is based on the theory that an insurer should not be liable for their own bad faith in situations where the insured obtained the policy by fraud, breached his or her obligations under the insurance contract or engaged in other forms of misconduct.

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DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

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