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What to Do if an Insurance Company Misguides You

Insurance law is so complex that it always seems like the giants have all the power. If an insurance company was acting in bad faith, how would you know? What do you do if you think an insurance company is unfairly denying a claim? Most importantly, if an insurance company deliberately lies to or misguides a customer, does he or she have legal recourse beyond the initial claim?

The simple answer? Generally, yes. If an insurance company knowingly lies to a customer, it often can be held responsible for any emotional or punitive damages suffered by the plaintiff. Take a look at how a bad faith insurance claim plays out.

Paying for your Legal Fees

If your insurance company denies a claim in bad faith or breaches its duty to “Good Faith and Fair Dealing,” you are entitled to sue. What’s more, if you sue to get your policy benefits, your insurance company must pay for your legal fees.

Compensatory v. Punitive Damages

If an insurance company files a bad faith claim, you have the option of seeking damages. These come in two basic types:

  • Compensatory. Generally speaking, compensatory damages seek to reimburse the affected party for the harm it has suffered. Compensatory damage rewards can be calculated based on outstanding medical bills, lost wages or benefits, and intangible losses, including emotional distress.
  • Punitive. These types of damages are not awarded as often. Punitive damages are sought to punish the wrong doer for shameful behavior. These may be awarded for gross negligence or wanton fraud. Punitive damages are typically awarded to a plaintiff to discourage the defendant from engaging in the behavior in the future. In a recent car insurance case, the Arizona Court of Appeals summarized Arizona law regarding punitive damages:

“To recover punitive damages, the plaintiff must show something more than the conduct necessary to establish the tort of bad faith. [Arizona has] developed a shorthand reference for this ‘something more,’ requiring the plaintiff to prove that the defendant’s evil hand was guided by an evil mind.”

As you can see, proving this can be tricky. In most cases, a bad faith claim will result in compensatory damage rewards, not punitive ones.

How to Build a Case

If you want to build a case against your insurance company because you believe it has acted in bad faith, keeping good records is essential. Here is what you can expect from a proceeding:

Guidelines for Pursuing Bad Faith Claims:

In general, to plead a bad faith claim, you must prove:

  • You are in a contractual relationship with the insurance company, and your account is up-to-date.
  • You are due the benefits under the policy.
  • Your insurance company is unreasonably withholding your benefits.

Discovery

Your attorney will likely order a detailed copy of your insurance policy, as well as any past copies that might reflect a change in coverage. He or she will also likely obtain any documentation pertaining to the insurer’s adjustment to the claim. These will reflect every individual who worked on the claim, what investigations they performed, what decisions they made, as well as the basis for these decisions. Having this information will help your legal team establish a timeline of your claim denial they can use to create a narrative that will convince a jury your insurance company acted in bad faith.

Remember that the burden of proof is on you, the plaintiff, in a bad faith claim. That is why it is so important to have all the information you can get from your insurance company.

Trial and Verdict

Once your legal team has all the necessary information, it can begin to tell your story using all of the evidence it has compiled during discovery. One way your attorney might try to do this is by using a narrative of trust and betrayal; in other words, that you trusted your insurance company and it betrayed that trust. If your legal team does this successfully, a jury will rule in your favor – and you may be rewarded damages.

If you have any questions about your bad faith claim, contact us.