Elements of a Bad-Faith Insurance Claim
Federal and state laws require insurance companies to treat their clients in good faith, meaning in an honest and reasonable attempt to resolve the claim. Unfortunately, insurance companies are for-profit businesses that often engage in practices that are designed to save them money. These include bad-faith practices, which are illegal violations of insurance law.
If you are a victim of insurance bad faith during a business insurance claim in Arizona, you or your insurance claim attorney will need to navigate a few essential elements to recover financial compensation.
What Is a Business Insurance Bad-Faith Claim?
Business insurance is meant to protect your enterprise from events or issues that may otherwise put you out of business, such as natural disasters, vandalism, theft and property damage. If your business insurance company handles your claim in bad faith, however, you may not be able to recover the benefits that you need to keep your doors open.
Under federal law, an insurance company is held to a high standard of care in upholding its insurance agreements with policyholders. If an insurance company or one of its agents is guilty of acting in a manner that is short of fair, prudent and reasonable, it may constitute insurance bad faith. Insurance bad faith is often used to avoid giving a claimant a fair payout.
The Insurer Withheld Benefits That Were Due
It is important to realize that just because you receive a denial of your business insurance claim, it does not mean the case is not over. You may have grounds to file a bad-faith claim against the insurance company. Their first element required for a claim is that the insurer refused to offer benefits that you were due according to the language and terms of the policy. The insurer may have withheld benefits through any of the following examples of bad faith:
- Wrongfully rejecting a claim
- Canceling a policy to avoid paying
- Delaying the investigation of a claim
- Delaying payout
- Misrepresenting the terms of a policy
- Undervaluing a claim
- Making an unreasonably low settlement offer
- Engaging in fraud, deceit, threats or intimidation
Evidence of these actions can come in the form of communications from the insurance company to you, such as descriptions of phone calls, emails or letters. Keep any form of communication that you receive from the insurance company during your business insurance claim. You should also obtain a copy of your business insurance policy to fully understand its terms and provisions.
The Reason for Withholding Benefits Was Unreasonable
The second element is that the insurance company’s reason for withholding benefits due was unreasonable. What is reasonable or unreasonable depends on the situation and what another insurance company would have done in the same or similar circumstances. To prove bad faith, you or your lawyer will need to establish that a reasonable and prudent insurance provider would not have treated you in the same manner.
Proving that an insurance company had an unreasonable or invalid reason for withholding benefits during your business insurance claim often requires testimony from an insurance expert or investigator. A jury will need to hear what the normal and lawful practice for an insurance company would have been to compare it to what the defendant actually did. This can allow the jury to come to a decision on whether or not the defendant is guilty of bad faith.
How Can a Business Claim Dispute Attorney Help?
Many different actions, tactics and failures to act could constitute insurance bad faith. If you believe you have encountered bad faith during a business insurance claim in Arizona, contact a Phoenix insurance bad faith attorney right away to discuss your legal rights. An attorney can represent you when going up against a powerful insurance corporation in pursuit of fair financial compensation not only for the underlying business insurance claim but also for treating you in bad faith.