When it comes to settling your insurance claim, the insurer is in the driver's seat. The policyholder lacks the industry knowledge, financial resources, and the insurer's weight in negotiations.
In recognition of insurance claims controlled by large insurers, courts in the United States will find an obligation of fair dealing and good faith in all insurance policies. If your insurer fails to meet their commitment to you with a reasonable investigation and processing of your claim, you have the right to file suit against the insurer.
Also known as "bad faith," the consumer has protection against insurers giving them the shaft. State law defines the extent of bad faith in the context of insurance policies. Your claim may continue under the common law rules set by the courts or by violations of state statutes regarding bad faith insurance claims.
Let's take a deep dive to understand the legal ramifications involving a bad faith insurance claim.
The Components of Bad Faith Common Law
The common law differs in its definition of bad faith from state to state. Most states define bad faith as unreasonable conduct without any proper causation. Other states may take a narrower view on bad faith. They may only find liability with the insurer if the rejected claim isn't fairly debatable, with the insurer realizing this is the case.
Some states view bad faith as a breach of contract or a tort, adding more confusion to the matter. Under the common law torts regulations, insurers owe their policyholders fair dealing and good faith because of the relationship between the parties.
If you have to prove common law bad faith to the courts, you'll need to focus on the following two aspects of your case.