What is the Doctrine of Utmost Good Faith?
Dealing with an insurance company can be difficult. You will have to contend with a lot of paperwork, rules and red tape to obtain coverage through an insurance policy. One of the protections you have as a consumer, however, is the legal obligation of good faith. The doctrine of utmost good faith is fundamental to insurance law. It is a legal obligation for the insurance company to act honestly when handling a claim. As a consumer, the doctrine of utmost good faith holds you to the same responsibility.
The Difference Between Good and Bad Faith
Good faith refers to an insurance company’s fair, honest and lawful dealings with a client. Every insurance company has a duty to treat clients and claims in good faith. An insurer that handles a claim in good faith will clearly express the policy’s limits and exclusions, properly investigate a claim, accept a valid claim in a timely manner, and offer a fair payout based on the benefits of the policy and the client’s losses. Bad faith, on the other hand, refers to an insurance company treating a claim unfairly, dishonestly or illegally. It is the opposite of good faith. Bad faith means the insurer is not observing reasonable commercial standards of fair dealing with the consumer.
An Insurance Company’s Good Faith Obligation
All insurance companies have a legal obligation to handle claims and clients in good faith. This obligation comes with various responsibilities owed to clients. Carriers must disclose all relevant and important information related to clients’ insurance policies when selling them insurance, for example. In general, a good faith obligation means the insurance company must treat clients fairly and reasonably. The company must honestly evaluate claims, make processes as efficient as possible and fulfill the terms of a policy.
A Consumer’s Good Faith Obligation
Consumers also have an obligation to act in good faith when dealing with insurance companies and the claims process. Consumers must be as honest as possible when applying for insurance benefits. They should answer all questions fully and honestly, provide requested evidence (within reason), and be truthful about what happened. A consumer cannot fraudulently make a false insurance claim or lie about accidents or losses.
Ways Insurance Companies Act in Bad Faith
An insurance company can engage in many acts that qualify as bad faith during the claims process. Any action or omission that goes outside of the insurance carrier’s obligation of utmost good faith to the client could constitute bad faith.
- Denying a valid claim
- Delaying payments without reason
- Requesting excessive information or evidence
- Taking unnecessarily long investigating a claim
- Refusing to offer a reasonable settlement
- Failing to disclose key policy information
- Hiding things in fine print on a policy
- Using obscure or ambiguous policy language
- Misinterpreting the provisions of a policy
- Canceling a policy after the client makes a claim
If your insurance company makes it difficult to file a claim or obtain benefits, speak to a lawyer about a potential bad faith situation. You have legal rights as the victim of insurance bad faith in Arizona.
Talk to a Phoenix Insurance Bad Faith Lawyer
Violations of the doctrine of utmost good faith can have serious consequences for the insurance carrier and client. If you lie to an insurance company, you could face penalties such as fines and even jail time for insurance fraud. If an insurance company fails to treat your claim fairly or in good faith, you have the right to file a lawsuit against the company. A successful insurance bad faith lawsuit could repay you for your initial damages connected to an accident, plus additional compensation to penalize the insurer for committing bad faith.
A Phoenix insurance bad faith lawyer can help you gather evidence against an insurance company that is guilty of bad faith. Your lawyer can assist with the paperwork and legal processes it takes to file a bad faith claim in Arizona, including collecting documents, correspondence and other information to prove the carrier’s dishonesty or legal offense. A lawyer can make the insurance bad faith process easier for you while maximizing your chances of obtaining fair financial compensation.