Bad Faith Insurance Denials
Insurance serves an important public purpose, because without it, individuals, families, businesses, and even entire communities can suffer terrible consequences if there is no protection for a loss. When an insurance company denies coverage, it can make an unfortunate situation even worse.
Insurance companies operate to make a profit and one way they minimize expenses is by not paying claims. But insurance companies must have a valid reason under the law to do so. Often, however, they come up with improper justifications for disclaiming coverage. If that happens to you, you may have a bad faith insurance claim against the insurance company.Reasons for the Claim Denial
Common reasons for denial of claims are that a material misrepresentation was made in the policy application, that coverage lapsed because of the failure to timely pay the premiums on the policy, and that the incident giving rise to a claim falls outside of the scope of coverage. These are by no means the exclusive grounds for insurance claim denials; others are routinely asserted by insurers.
Just because the insurance company asserts a reason for denying an insurance claim does not mean it is correct, nor does it mean that a policyholder has no legal recourse. A policyholder always has the right to challenge the basis for an insurance claim denial in a court of law.What is Bad Faith?
If a policyholder has been treated unfairly or in bad faith during the claims process, leading to the failure to pay a claim, there may be a bad faith claim against the insurance company. Bad faith may occur when the insurance company does the following:
- Denies a claim
- Requires unreasonable information from the insured
- Makes repeated requests for information that unnecessarily prolongs the claims process
- Fails to make a reasonable settlement offer within a reasonable period of time after liability has become clear
- Refuses to pay claims without conducting a reasonable investigation
- Compels an insured to commence litigation to collect amounts due under an insurance policy
- Fails to affirm or deny a claim within a reasonable period of time
When there is a bad faith insurance denial, the policyholder is entitled to the amount due under the policy and may also be due any consequential damages suffered as a result of the denial. An example is a company that goes out of business after the coverage from a fire or other commercial policy is not paid after a loss occurs. In that case, a court may award not only the policy amount but also damages for the subsequent business loss.
In some instances, an award of punitive damages or attorney's fees may be awarded to a policyholder who has been subject to a bad faith insurance denial.
Please contact New Jersey and New York bad faith insurance attorney Eric Dinnocenzo at (212) 933-1675 for a free consultation if you have experienced a bad faith insurance denial.