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What Is “Burden of Proof” and How Does It Apply to Insurance Bad Faith Cases?

Our criminal justice system functions around the concept that every accused individual is innocent until proven guilty. The concept of “burden of proof” means that the accuser must provide evidence supporting his or her claims. The accused doesn’t necessarily have to prove his or her innocence – the accuser must prove the accused is guilty. The reason for these laws is to ensure that individuals aren’t wrongfully convicted of crimes and not sentenced based solely on conjecture and circumstantial evidence.

The same logic applies to our civil system. The plaintiff must show that the defendant is liable for whatever actions (or inactions) are alleged. Furthermore, the concept of burden of proof not only applies to disputes between individuals, but also has bearing in almost any type of official legal dispute – including insurance claims.

What Is “Bad Faith” in Reference to Insurance Claims?

Insurance companies are in the business of making money, so they typically try to find any means of lowering the amount they must pay on claims. However, they must adhere to the letter of the law, and denying a claim or lowering the amount of money paid on a claim must be borne of good faith (i.e., honest interpretation of the policy) and the facts of the incident in question.

“Bad faith” is a term used to describe underhanded or outright illegal tactics some insurance companies may employ to avoid paying on a claim. Whenever a dispute between an insured individual and his or her insurance company arises, the court will examine the insured person’s policy and the facts of the case to determine whether the insurance company must pay on the claim. The insurance company must provide proof that its ruling on the claim is warranted and based on objective evidence, not conjecture.

For example, a homeowner may have protection against hurricane damage, but not flooding. If his or her home is destroyed by a hurricane, he or she will need to prove that the damage was caused by the intense winds of the hurricane and not by flooding. The insurance company will attempt to prove that all or some of the damage was caused by flooding, and thus not applicable to the homeowner’s insurance claim. If the insurance company attempts to subvert the claim through illegal or unethical means, such as fabricating evidence or tampering with any witnesses, the company is acting in bad faith.

Insurance companies essentially sell a promise to pay their clients for covered losses. If they attempt to argue with the insured about the covered damages or the amount of a claim, they must do so in good faith and make every effort to honor the insured’s policy. If an insurance claim agent denies a policy or refuses to pay the full policy amount, he or she must provide a clear and reasonable explanation for such actions.

Bad Faith Lawsuits

If an insurance company receives a letter claiming bad faith, the company will more than likely attempt to avoid a lawsuit by reviewing the case and offering a better settlement—if it’s warranted. If the case goes to trial, the insured must provide evidence of his or her claim of bad faith. This could include written correspondence between the insured and the insurance claim agent or testimony concerning the conversations that the insured had with the agent. Typically, if the insurance company suspects that a claimant’s assertion that the company is acting in bad faith holds any water, they will offer a more attractive settlement.

If you find yourself embroiled in insurance claim difficulties, it’s vital to understand your rights and the insurance company’s obligations. If you believe your insurer is acting in bad faith, the best thing you can do is to consult with an attorney. Most insurance companies will make every effort to avoid a bad faith lawsuit. If you believe your claim is worth more than their offer, consulting with an attorney is a great way to take steps toward a fair settlement.