Insurance Bad Faith FAQs

Q: What is insurance bad faith?
Q: What obligations does my insurance company have to me when I make a claim?
Q: What are some common cases of bad faith?
Q: Can an insurance company "low ball" me in settlement negotiations?
Q: Can an insurance company deny my claim for any reason they choose?
Q: Can an insurance company ignore my requests for information or clarification?
Q: Can an insurance company delay paying me my claim?

 

What is insurance bad faith?

A: The law recognizes that a consumers' relationship with their insurance company is a special relationship often called a fiduciary relationship. Generally, this means that the insurer must treat its policyholder's interests with the same consideration it would give its own interests.

Why is this the case? Because when consumers buy insurance they generally: (a) cannot set the terms of the contract; (b) are not in equal bargaining position with the insurer; (c) the insurer agrees to pay the amounts owed under the policy; and (d) at the time a policy holder tries to collect they are generally facing great distress: a wrecked car, a burned out house, or a terrible injury. Under these circumstances, the law recognizes that it would be fundamentally unfair for an insurance company to take advantage of the situation. Therefore the law sets special obligations as to how insurance companies must treat their policyholders.

Bad faith laws require insurance companies to live up to their end of the insurance contract. Your insurance company has an obligation to deal with you fairly and promptly. If an insurance company does not play by these rules, it may owe you more than the amount of your policy.

There are many ways that insurance companies can commit bad faith. For example, an insurer may fail to promptly and fully investigate your claim. An insurer may choose to delay or deny payment of your claim. An insurer may also use unreasonable interpretations of the policy language in order to limit your recovery or avoid payment altogether.

It is important to remember that your insurance company must treat you fairly. If the company does not, you have rights including filing a bad faith claim

What obligations does my insurance company have to me when I make a claim?

A: An insurance company must treat you fairly. There are many things they have to do and many other things that they are forbidden to do. We have tried to make a simplified version of the law on this subject and put it together in what we call the Policy Holder's Bill of Rights. Some of these rights are:

  • An insurer must treat its insured's interests with the same consideration it gives its own interests.
  • The claims adjuster has a duty to help the policyholder with the claim.
  • The insurer must promptly and fairly investigate every claim.
  • If payment is owed, an insurer must promptly pay the claim.
  • If the insurer denies a claim, it must give an explanation to the policy holder.
  • The insurer must disclose significant facts to its policyholder.

Again, insurance companies must treat insured parties fairly and reasonably. If an insurer violates one or more of these rules, it may have committed bad faith.

What are some common cases of bad faith?

A: Bad faith can arise in almost any situation where an insurance company treats an insured individual or party unfairly. We have been involved in cases including house fires, property damage claims to home or commercial property, uninsured/underinsured motorist coverage and more. There are a variety of other contexts where bad faith can arise. For example, bad faith may occur when insurance companies delay or deny payment of benefits for health insurance, disability insurance, life insurance or long-term care insurance.

Can an insurance company "low ball" me in settlement negotiations?

A: The simple answer to this is no. While it is very common in day-to-day negotiations for one party to try and "low ball" (meaning, giving an unreasonably low offer with the hope that the other party will accept) the other party, this practice by insurance companies has been expressly forbidden by Wisconsin courts. This goes back to the fundamental problem of unequal bargaining position. Because the average consumer is in no way on equal terms with an insurance company in terms of resources and knowledge, our courts have forbidden insurance companies from employing this strategy.

Can an insurance company deny my claim for any reason they choose?

A: No. Any denial of a claim must be made on a "reasonable basis." This means that an insurance company must properly investigate the claim and fairly consider the plain facts revealed by that investigation. That said, insurance companies do not have to pay every claim. If a claim is debatable or questionable, the company can deny the claim.

Can an insurance company ignore my requests for information or clarification?

A: No. Your insurance company not only has the duty of good faith to you, but also the duty of fair dealing. Contained in this larger concept is the duty to timely and adequately communicate with its insureds. Simply put, your insurance company cannot ignore you.

Can an insurance company delay paying me my claim?

A: No. This practice is strictly forbidden under Wisconsin law. If an insurance company delays payment owed without an acceptable reason, it is responsible for paying you interest in addition to the money owed from the claim itself. Our statutes have a provision directly on point. ยง 628.46 of our statutes requires insurers to pay twelve percent (12%) interest on any claim not paid within thirty (30) days after the insurer has notice of the claim and the amount due.

Do you have additional questions?
If you believe that your insurance company is acting in bad faith and breaking Wisconsin law, talk to a Wisconsin bad faith insurance lawyer about your situation. Contact us at (715) 343-2850 or by filling out the simple form below. We are here to help.
2810 Gilman Drive
Plover, WI 54467
phone: 715.343.2850
toll free: 855.343.2850
fax: 715.343.2803
email: jason@studinskilaw.com