Insurance is a device specifically intended to provide financial help at the very times that we are most likely to need it: our house burned down, we’ve become unable to work, we need medical treatment that costs thousands and thousands of dollars, and so on.
Unfortunately, the way insurance works is that the people who purchase the insurance (the insureds) immediately begin paying premiums to the company that issued the insurances (the insurer). And we keep on paying them as long as the policy remains in effect. It may be years, sometimes decades, before a claim is filed.
Yet the insurer remains in a position of control. It is the one that decides whether to pay, when to pay and how much to pay. And its immediate financial incentive is to pay out as little as possible. Many Arizona residents have had the misfortune of learning this unfortunate truth.
Insurers Can’t Legally Act Unreasonably
Arizona has long recognized that this situation was unfair to insureds. To rectify the imbalance of power, the insurer is required to deal with its insureds in “good faith.” A violation of that duty—acting in “bad faith”—amounts to a separate civil wrong or “tort.” In essence, an insurer’s actions on an insurance claim amount to bad faith if there isn’t a “reasonable basis” for those actions. The principle applies to the entire claim process:
- Deciding whether the loss is covered
- Processing the claim, from the time it is received to the time a final decision is made on whether to pay it; that includes any investigation of the facts, communications with the insured, record-keeping, and a host of other things
- Determining the value of the insured’s loss
What Does That Mean for Policyholders?
That duty of good faith is good news for all the people who have insurance. Because “bad faith” is more than just a breach of contract, the insured may get damages for many things beyond the benefits due under the contract terms. In fact, bad faith damages may, depending on what the insured did and how skillful your attorney is in demonstrating the harm that it caused, including:
- Pain, emotional distress, and the like
- All economic damages that resulted from the bad faith
- Attorney fees
- Punitive damages
And, because the insurer’s good faith duty applies to the entire claims handling process, insurers can be held to account for bad faith, even if the claim is ultimately found not to be covered by the terms of the policy. All that’s required is that the insurer has unreasonably processed the claim.
What is “Unreasonable?”
There is a reason that, often times, insurance companies aren’t held in high esteem by the public. One insurer tactic that has consistently been found to be bad faith is using the insurer’s economic leverage to force its insureds to settle for less than they are actually owed. Threats to drag out the process, coupled with offers to make the nightmare go away if you take this offer now, are very tempting to desperate and anxious people.
Among the many other kinds of conduct that may amount to bad faith are the following:
- Denying a claim without thoroughly investigating it first
- Denying a claim based on policy terms that have already been ruled invalid
- Dragging out the investigation of the claim without sufficient reason
- Failing to pay
- Inadequate investigation and evaluation
- Failure to tell the insured what needed to be done, and what forms needed to be submitted, to collect on a claim
It’s Complex—Get Help
Proving that the insurer’s actions weren’t “reasonable” requires in-depth understanding of the insurance industry and of the specific kind of insurance involved. It pays to have the assistance of experienced attorneys when faced with that complex task. The attorneys at the Surrano Law Offices in the Phoenix area have decades of success specifically in bad faith claims. We know how insurance companies work, when to settle and when to go to court. If your insurance company is dragging its feet, has denied a reasonable claim, or is giving you the runaround, call the Surrano Law Offices today and tell us your story.