When do I have a right to bring a claim against an insurance company for treating me unfairly?
When an insurance company agrees to insure you, they have an implied obligation to be honest and fair in handling any insurance claims you may have; this is known as "good faith and fair dealing." In other words, when you bring a claim to them-from being injured in a car accident, for example-the insurance company is not allowed to search for reasons why they shouldn't have to pay you. Instead, they are required to make a thorough investigation of the claim, consider all the circumstances that support it, and most importantly, give as much consideration to your financial interest as the company gives to its own financial interest.
When the insurance company refuses to pay your claim when it should, refuses a claim without doing a thorough investigation, or attempts to settle your claim for less than it knows the claim is worth, the insurance company is then acting in "bad faith" by neglecting their obligation to you of "good faith and fair dealing." In this event, the insurance company maybe liable for "insurance bad faith." Additionally, the court may require them to pay more than the claim was originally worth, including punitive damages in the event that their misconduct is extreme or outrageous.
Because most insurance companies are private, part of their interest involves running a profitable business. Unfortunately, some insurance companies try to make a profit by cutting corners and denying claims that they are more than obligated to pay. Insurance bad faith liability discourages companies from acting unfairly or committing dishonest business practices just so that they can save some money, and instead creates a balanced playing field in order to ensure that your financial interests are put at the same level of priority as theirs.
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