Cameron Miranda
Insurance companies are required to act in good faith and provide their customers with a fair deal. However, they often break the law in their pursuit of profit. For example, they may delay the start of an investigation into a claim beyond the deadline, fail to conduct an investigation, or fail to provide important information. They may also bully their own insured, lie to them, or pay only part of a claim. In addition, health insurance companies have been known to illegally treat people suffering from addiction as second-class citizens, and deny coverage for lifesaving care.
| Characteristics | Values |
|---|---|
| Delaying the start of an investigation into a claim | Insurance companies delay the start of an investigation into a claim with the hope that the claimant will give up on it. |
| Failure to conduct an investigation | Insurance companies deny claims without sending out an adjustor or refuse to look at estimates provided by the claimant. |
| Failure to provide important information | Failing to disclose the existence of coverage, notify the claimant of a claim deadline, or provide the necessary paperwork to complete a claim. |
| Offering low settlement amounts | Insurance companies offer low settlements to increase their profits, but they are not allowed to purposely offer far less than a claim is worth. |
| Misrepresentation of the law | Insurance companies purposely misrepresent the law or the language of a policy to avoid paying a claim. |
| Making threatening statements | Insurance companies that make threatening statements to a policyholder may be prosecuted under the law. |
| Delay in payment | Insurance companies use delay tactics to avoid paying a fair amount on claims and to put off the payment of legitimate claims. |
| Bullying their own insured | Insurance companies use high-pressure negotiations with their own insured to reduce the value of the claim. |
| Lying to their own insured | Adjusters lie to their insureds by hiding benefits or telling them they will only pay for limited types of treatment. |
| Paying most of a claim | Insurance companies pay only part of a claim to save money. |
What You'll Learn
Delaying investigations and payments
Delayed investigations and payments are a common way for insurance companies to break the law. When an individual files a claim, insurance companies are required to act in good faith and provide a fair deal. This means they must investigate the claim, even if it is just by sending an adjuster to review the damage. Most state laws have deadlines for when an insurance company must accept or deny a claim, typically ranging from 15 to 60 days. If an insurance company delays an investigation beyond these deadlines, they may be violating the law.
Insurance companies sometimes intentionally delay the start of an investigation, hoping that the claimant will simply give up on the claim. This tactic is illegal and can cause significant financial and emotional distress for the claimant. In some cases, insurance companies may even deny a claim without conducting a proper investigation, which is also illegal.
For example, if an individual's car is damaged while parked on the street and they file a claim, the insurance company must send an adjuster to assess the damage. If the insurance company denies the claim without sending an adjuster or refuses to consider the estimates provided by the claimant, they are not acting in good faith.
In addition to delaying investigations, insurance companies may also unlawfully delay payments. When an insurance company makes a belated settlement offer, it does not correct or undo the previous wrongful conduct. Any payments made to the insured only reduce the insurance company's final liability as determined by a jury.
To fight against these illegal practices, individuals should seek legal assistance and hold insurance companies accountable for their actions. By working with an insurance attorney, individuals can understand their rights and take appropriate legal action against insurance companies that break the law.
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Failing to conduct investigations
When an insured files a claim, the insurance company is supposed to launch an investigation to evaluate the merit of the claim. This involves sending a licensed adjuster to assess the damages and determine if the claim is valid so that a payout can be made. However, some insurance companies delay or fail to conduct investigations altogether, which can affect the outcome of the claim.
In most states, there are deadlines for when an insurance company must accept or deny a claim, typically ranging from 15 to 60 days. If an insurer fails to initiate an investigation within this timeframe, they may be violating the law. For example, in Pennsylvania, insurance companies have 30 days to investigate a claim, deny it, or accept it. If they cannot complete the investigation within 30 days, they must provide a written explanation for the delay and continue to do so every 45 days until a decision is made.
A failure to investigate a claim in a timely manner or to use the investigation to neglect the insurance company's responsibilities outlined in the policy is considered an act of bad faith or a breach of their obligations. Insurance companies are required by law to consider the interests of the insured and thoroughly investigate all possible sources that would support the claim. They cannot deny a claim in good faith until they have thoroughly investigated the reasons for denial.
If an insured believes that their insurance company is delaying an investigation or failing to conduct one properly, they should contact an attorney, as it can be challenging to prove bad faith without sufficient evidence. An insurance attorney can help gather evidence, establish the validity of the claim, and ensure the claim is not denied due to an inadequate investigation.
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Offering low settlement amounts
Insurance companies are required by law to act in good faith and provide their customers with a fair deal. However, insurance companies are also profit-driven businesses, and so they may attempt to increase their profits by offering low settlement amounts to claimants. This is a common issue, as adjustors working for insurance companies will try to save their company money.
While it is not illegal for insurance companies to offer low settlements, they are not allowed to purposely offer far less than a claim is worth. If a claimant has provided estimates for damage repairs and their policy has adequate coverage to pay those claims, the insurance company may not offer a settlement for less than the lowest estimate received.
There are several reasons why an insurance company may offer a low settlement amount:
- To maximize profits: Some insurance companies focus on making profits and will therefore make low settlement offers to minimize costs and maintain profitability.
- Lack of evidence: An insurance company may make a low settlement offer if the claimant does not have strong evidence to support their claim.
- To prevent setting a precedent: Insurance companies may try to avoid paying out higher amounts as this can set a precedent for future claims, possibly increasing their overall payout obligations.
- Many claimants accept low offers: Many claimants accept low settlement offers due to financial pressure, inadequate information, uncertainty, and trust in the insurance company.
If you receive a low settlement offer from an insurance company, it is recommended that you hire a lawyer to help you scrutinize the offer and develop a counteroffer. It is important to remain calm and not react emotionally to a low settlement offer, as this will only worsen the situation. A lawyer can explain why the offer is unacceptable and contest any inaccurate arguments made by the insurance company. If the insurance company continues to refuse to make a fair offer, your lawyer can file a lawsuit on your behalf.
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Misrepresenting the law
Insurance companies sometimes break the law by misrepresenting the law or the language of a policy to avoid paying a claim. This is a violation of the law, as insurance agents have a duty to be truthful in their statements.
There are two types of misrepresentation: negligent misrepresentation and fraudulent or intentional misrepresentation. Negligent misrepresentation occurs when incorrect information is provided to the insurance provider without malicious intent. For example, a policyholder might mistakenly report the age of their home's roof, resulting in a higher premium.
Fraudulent misrepresentation, on the other hand, involves knowingly providing false information or concealing relevant information to deceive an insurance provider. For example, if a policyholder falsely denies prior insurance claims on their application. Fraudulent misrepresentation can lead to harsh consequences, including legal repercussions and criminal charges for insurance fraud.
Under the law, insurance fraud can be prosecuted when there is intent to defraud, an act is completed, and the act and intent come together. Monetary loss is not necessary, as long as the suspect has committed an act with the intention to commit the crime.
In addition to denying claims, insurance companies may also use misleading statements about the law to justify delaying investigations into claims. Most state laws have deadlines for when an insurance company must accept or deny a claim, and if an insurance company delays an investigation beyond those dates, they may have violated the law.
To avoid misrepresenting the law, insurance companies should ensure that their agents are well-trained and knowledgeable about the laws and policies they are explaining to customers. They should also have clear and transparent communication with their customers to avoid any misunderstandings.
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Making threatening statements
Insurance companies are required by law to act in good faith and deal fairly with their customers. However, some companies may resort to making threatening statements as a tactic to avoid paying rightful claims. This is illegal and can be classified as bad faith or a breach of contract.
In a notable case, a Florida woman, Briana Boston, was charged with making threats to kill or injure and conducting a mass shooting or an act of terrorism. Boston made threatening statements to a health insurance representative, repeating words found on bullet casings used in the murder of an insurance executive. During a phone call regarding denied medical claims, Boston stated, "Delay, deny, depose. You people are next." This phrase had become nationally recognised as a statement directed against insurance companies.
It is important to understand that insurance adjusters making decisions about claims do so in the interest of both the insurance company and the policyholder. However, some insurance carriers may take unreasonable measures to avoid paying rightful claims. Working with an experienced local bad faith insurance attorney can help ensure that the policyholder has an advocate and can explore their legal options.
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Frequently asked questions
Insurance companies often delay the start of an investigation into a claim, hoping that the claimant will give up. Most state laws have deadlines for when an insurance company must accept or deny a claim, ranging from 15 to 60 days. If the insurance company delays the investigation beyond these dates, they may have violated the law.
Insurance companies use high-pressure negotiation tactics with their own insured customers, constantly haggling to reduce the value of the claim. This can include aggressive bullying, browbeating, and intimidation.
Insurance adjusters often lie to their insured customers, including by hiding benefits or lying by omission. Sometimes they will tell an injury victim that they will only pay for limited types of treatment.
Insurance companies violate parity laws by illegally refusing or limiting treatment for mental health patients and those suffering from addiction. They also add exclusions to coverage for behavioural health services.
