What is Insurance Company Bad Faith?

August 16, 2023

Insurance Companies are Loyal to Themselves

Insurance is Designed to Protect You from Loss

The need to protect what is important and valuable to you is genuine; and, in many cases, insurance policies provide you with the peace of mind you need when worrying about severe financial loss.

When you purchase an insurance policy, you are promising to pay premiums (a specific amount of money at certain times) for reimbursement for losses. Today, while you can insure almost anything, some of the most common policies cover property, health, automobiles, and even your life.

When this coverage is purchased, insurance company clients believe that the process will be simple if they ever need to make a claim. They will be properly compensated for their losses on time.

When this time comes, however, many find themselves at odds with their insurance carrier; underpaid and denied claims are commonplace.

Understanding how insurance companies operate makes it easy to recognize how and why this happens so frequently. Quite simply, insurance companies’ primary loyalty is to their shareholders. This means their ultimate goal is to maximize profit. Client premiums are income; selling policies impacts shareholders positively.

That said, client claims are expenses; each dollar paid negatively affects the companies’ bottom lines.  Thus, there is an incentive to minimize paid claims. However, in many cases, when an insurance company denies or underpays your claim, they are acting in bad faith.

What is Insurance Company Bad Faith?

Insurance companies across the country and in Oklahoma are required to treat their clients (policyholders) in good faith. So, they must carefully review all submitted claims with an independent perspective, identifying both reasons to pay and to deny.

Unfortunately, because of the incentive to minimize claims, many insurance agents focus more strongly (or often solely) on uncovering reasons to deny or underpay submitted claims. This is operating in bad faith.

Some examples of bad faith include:

• Not conducting a complete investigation of the claim
• Misrepresenting policy coverage
• Intimidating clients to accept settlement offers
• Making the claims process overly complex
• Purposefully undervaluing the claim and offering a settlement well below what should be paid
• Requesting additional, but unnecessary, documentation of the damage
• “Slow-rolling” the claims process.

Quite honestly, insurance companies know, from experience, that many of their customers will simply accept the first response (whether it be a denial or underpayment) as their only option. Thus, the company recognizes considerable savings.

Because the entire claims process (from submission to payment/decision) can be long and frustrating, many clients agree to what is offered — even if it does not provide them adequate compensation — to simply be done with the process. They cannot bear to continue to live in limbo and prefer to move forward with their lives.

When this happens, the portion of the claim not paid is assumed by the individual clients, negatively and unfairly impacting their finances. For claims of significant size, bad faith can have a lifetime effect on financial health.

Can You Sue an Insurance Company for Bad Faith?

You May Have Recourse

When you suffer a loss and are struggling with getting the appropriate compensation from your insurance company, you may be able to take legal action. The language in your policy, your actions, and your insurance company’s responses all play a role in whether or not you have a viable case.

For example, if your insurance company states that you are not covered for the particular loss you are claiming, but your policy does provide that coverage, you would have a reasonable legal claim. Or, if your insurance company’s valuation of your damages is less than what you have actually experienced, you may be able to prove the damages and be compensated accordingly.

If an insurance company is accused and proven to have acted in bad faith, they may face appreciable penalties.

That said, pursuing legal action can be challenging. The process is complicated and can be confusing to someone without legal and insurance industry experience.  Engaging a bad faith lawyer is the first step on the road to pursuing the settlement to which you may be entitled.

Suing an Insurance Company

Knowledge is Power

Managing the legal process of suing your insurance company is complicated and time-consuming. Engaging the services of an experienced bad faith insurance company law firm can help you maximize your compensation and reduce the stress associated with filing your claim.

The knowledge and experience necessary to effectively manage the legal processes associated with successfully filing a bad faith lawsuit is considerable. The process and paperwork can be overwhelming. In most cases, everything must be submitted perfectly for claims to be paid.

It is likely to take a great deal of time to gather and submit all required information to dispute their decision and prove bad faith. As a layperson, you don’t have the ability to correctly complete this daunting step on your own.

Your bad faith lawyer will:

• Review your policy to determine coverage
• Investigate and substantiate your damages
• Examine your claim submissions to determine if they were conducted in accordance with your insurance company’s requirements
• Review all communication between you and the insurance company, paying attention to the language used and timing
• Determine the totality of your losses in comparison to the settlement offered
• Negotiate with the insurance company to obtain appropriate compensation
• Litigate your case, if necessary, proving contractual, economic, non-economic, and even punitive damages.

When filing a bad faith lawsuit, leveraging the experience of a reputable insurance law firm should be your first course of action.

Understanding Bad Faith Damages

Your bad faith insurance attorney will review your claim and help you determine the damages to which you may be entitled. It is important to realize that Oklahoma does limit who can receive bad faith damages; they must be paid to the individual or organization who paid the insurance premiums.  Third-party claims are not allowed.

In Oklahoma, bad faith damages may include both compensatory and punitive damages as explained below.

Compensatory Damages

Compensatory damages in a bad faith lawsuit can be segmented into three parts:

• Contractual Damages: This figure corresponds to the full value of your insurance claim – basically, the compensation to which you were entitled based on the severity of your loss and the terms as outlined in your insurance policy.
• Economic Damages: Easy to quantify, economic damages in a bad faith insurance lawsuit may be comprised of the costs of filing and litigating your case (including court costs, legal fees, lost wages, and even lost interest on the settlement you should have received).
• Non-Economic Damages: While these may be more challenging to calculate, they are very real. Quite often they include the emotional distress that arises from both managing the conflict with your insurance company and on your life (and that of your family) as you struggle financially as a result of the hardships of not receiving the reimbursement you deserve.

Your bad faith insurance attorney will help calculate the request for damages, ensuring all of your losses are well-documented. The Oklahoma court hearing your case will make the final decision on compensatory damages awarded.

Punitive Damages

In some cases, the bad faith exhibited by an insurance company is even more serious. Instances like this may result in the assignment of punitive damages. Punitive damages are designed to punish the insurance company for their actions and to discourage them (and others) from repeating behaviors of this type.

According to 23 OK Stat § 23-9.1 (2014), the cap on punitive damages is $100,000 or the amount of actual damages awarded by the jury. In certain cases where “an insurer has intentionally and with malice breached its duty to deal fairly and act in good faith with its insured” and damages up to $500,000 may be levied.

Your bad faith insurance attorney can review your case and let you know if you may be entitled to punitive damages.

Act Now . . . Time is of the Essence

Contact a Bad Faith Insurance Attorney Today

The act of filing an insurance claim means you have suffered a loss that has economic consequences. The emotional impact of these losses is often considerable; it is not surprising that many in this position are under incredible stress.

When your insurance company’s response to your claim is made in bad faith, the impact is even more devastating. Not only have you experienced an incredibly unfortunate loss, but now the company you had engaged to protect you is letting you down.

Now is the time to take advantage of a professional with the experience necessary to positively impact your situation.

Your bad faith insurance lawyer will provide advice and counsel regarding both the validity of your case and how you should move forward.

Oklahoma law protects clients of insurance companies from bad faith by holding these organizations responsible for their actions. If found guilty, they can be required to fully compensate you for your damages, legal fees, and other associated costs. In some of the most serious cases of bad faith, punitive damages have also been awarded.

Don’t hesitate to respond to bad faith actions by your insurance company; there are time limits associated with claims of this type.

Contact the professionals at Doug Terry Law at 405-463-6362 to schedule a free consultation today. These professionals are well-versed in insurance industry bad faith law and are well-known for their approach to service.