Becoming a policyholder with an insurance company in Las Vegas means entering into a contract where both parties agree to cooperate with one another. Unfortunately, not all insurance companies act in good faith when it comes to processing customer claims. These insurers do what they can to not uphold their end of the policy and deny legitimate claims.
This is known as acting in bad faith, and you can take legal action against an insurance company engaging in this practice. Have you been denied insurance claim? Call now to speak to a lawyer about how they can help you take action. Meanwhile, read on to learn more about the difference between good and bad faith actions by an insurer and what you can do about it.
An Insurance Policy is a Contract between an Insurer and an Insured
Under Nevada law, signing your name to an insurance policy starts a contract between you and your insurance company. The insurer promises to uphold their end of the contract as long as you pay your premium in a timely manner. In the event an incident occurs that is covered by the policy, you submit a claim to your insurance company for processing.
The insurance company reviews your claim, then pays out and settles the claim as long as it’s in accordance with the policy. This is business as usual for both you and the insurer and shows that the insurer is acting in good faith with its policyholders. In fact, insurers follow a principle known as the doctrine of utmost good faith, a doctrine that ensures that the insurance company acts in an honest fashion.
The Duties of an Insurance Company to Process a Claim
When you make a claim that’s in line with your insurance policy, you expect the insurer to respond by paying for the claim according to the agreement. You’ve made the payments on time and with regularity, and the insurance company should respond with good faith.
For example, you had a tree limb fall on your roof, and a hole was created as a result of the impact. Your home insurance policy states that it will pay for the repairs for damage caused to your roof by a falling tree limb. You make a claim with the understanding that the damage is covered. The insurance company agrees with your understanding of the policy and then helps you make arrangements to get the damage fixed as well as pay the contractors for their materials and labor. In this example, the insurance company is acting in good faith and in accordance with the policy.
Some of the aspects of acting in good faith include:
- Paying out on claims in a reasonable amount of time.
- Provide a legal defense for a policyholder against a third-party claim.
- Settle claims as required by law or the terms of the contract.
- Being honest with a policyholder and not engaging in fraudulent behavior.
- Timely payout of claims.
Your Insurance Company Can Deny Your Claim While Acting in Good Faith
There are valid reasons why an insurance company denies your claim and can say it’s acting in good faith. You may have submitted a faulty claim, didn’t report your claim in a timely fashion, or the service isn’t covered by the policy. You can always appeal the claim and ask for a review to get coverage, but success is not guaranteed.
The contract aspect of an insurance policy goes both ways between you and the insurance company. In order to get your claim processed successfully, you have to follow the rules that are laid out in the policy. This is due to the fact the insurance company is acting in good faith and following the policy that both of you agreed to.
When an Insurance Company Acts in Bad Faith
An insurance company is considered to be acting in bad faith when it knowingly denies claims that are valid and issues denial reasons that aren’t in line with the policy. It’s true that an insurer can issue a denial for any reason, but there has to be a very good reason behind the denial. Otherwise, consumers are paying their premiums for no reason at all, something that goes against the spirit of contract law.
Some of the bad faith actions include:
- Knowingly deny a reasonable claim and force the policyholder into litigation.
- Make knowing misrepresentations to the policyholder.
- Fail to make a proper investigation into the facts of the claim.
- Attempting to settle a claim for less than it’s worth.
- Failure to pay the policyholder the benefits they are owed.
- Make unreasonable delays in processing a claim.
If you’ve experienced any of these issues or feel that the insurance company is making excuses to drag out your claim or outright deny it, you’re dealing with an insurer that’s acting in bad faith.
Why Would an Insurance Company Act in Bad Faith?
Insurance companies are for-profit organizations. They’re in business to make profits for their shareholders and be able to pay for their operation. When an insurer finds itself losing its profitability, it needs to cut costs to keep its doors open. Claims for insurance coverage are the largest drain on an insurance company’s finances, even though it’s required by law to maintain a balance to cover claims.
When an insurer is in financial trouble or simply engaging in actions to save money, it does what it can to preserve its cash flow. Since claims are the largest draw on the insurer’s financial liquidity, it finds ways to draw out the payment of claims or denying them outright. Sometimes the insurer can justify the denial, but not always. However, this doesn’t stop the insurer from making the attempt to deny the claim even if the clause is clearly written, and there’s no arguing the fact that the insurer agreed to pay the claim as outlined in the policy.
Denying claims means the insurance company doesn’t have to pay out, thus preserving its profitability.
What to do When an Insurance Company Acts in Bad Faith
If you feel that your insurance company is looking for reasons to prevent you from making a valid claim, call the bad-faith lawyers at Leverty & Associates Law today. Our team of lawyers go over the details of your policy and your claim to uncover evidence that your insurer is acting in bad faith. We don’t hesitate to hold insurance companies responsible for their actions and show other insurers that there are consequences for making poor decisions in the name of profits. Get in touch with us today to schedule a consultation and learn more about the legal recourse that’s available to you.