Insurance is often the last line of defense between an individual and financial hardship. People have homeowner’s policies that protect them from property damage and personal liability. They also have motor vehicle policies that protect them if they cause a crash.
The law in Pennsylvania and also certain federal statutes help regulate the insurance industry. After all, insurance companies often have a financial incentive to refuse to cover expenses. Any significant claim might diminish the company’s profit margins for the quarter. Insurance laws help prevent scenarios in which a company does not fulfill its obligations to those who have paid for coverage.
If an insurance provider fails to follow the rules outlined in the law or its own policies, it could face a bad faith insurance claim from someone with uncovered expenses. What are the most common types of bad faith insurance that could leave someone in a difficult financial position?
Unreasonably long processing delays
It is easy for people to become demotivated and give up even when they know they deserve insurance coverage. Some companies try to use human nature to their advantage by refusing to respond to claims or creating so many delays that people simply give up instead of demanding compensation. An insurance company must provide necessary documents within 10 days of learning about a claim to comply with Pennsylvania state law. Once the company receives the necessary paperwork, it has 15 days to respond in writing. Any significant deviations from those state timelines might justify a bad faith insurance claim.
Inappropriate claim denials
Perhaps the most egregious form of bad faith insurance occurs when an insurance professional denies a claim that clearly falls under the scope of a policy. The company does not have a justification for refusing to pay, and the policy very clearly shows that someone is eligible for coverage. Insurance companies may try to invoke confusing rules and convince someone that they don’t deserve coverage when they are actually eligible for compensation. Those who cannot get approval for a reasonable claim may need to take the matter to civil court.
Low settlement offers
At first glance, an insurance settlement offer seems like a step taken in good faith. The company responds to the claim and probably does so in a timely manner. However, the amount offered as a settlement could be far less than the available coverage for the total costs of the claim. Insurance companies may try to trick people into accepting a settlement that absolves the company of future liability. The party in need of compensation may not even realize that they have given up their right to make additional claims until they have more expenses that the insurance company won’t cover.
Bad faith insurance litigation can lead to both payment on a claim and additional penalties for an offending insurance company. Ultimately, being able to recognize bad faith insurance approaches can help policyholders stand up for themselves.