Obligations of Insurance Companies When Handling Claims
When you purchase an insurance policy, you do so to protect your finances in the event of a catastrophe. Unfortunately, insurance companies do not always act in the best interests of their clients. An insurance provider will sometimes offer less compensation than necessary or deny a claim entirely.
If you have filed a claim with your insurance company only to have it denied, you may feel powerless. Claimants in this situation often believe that their insurance provider has the final say in the matter, but this is not true. You may not realize it, but you are entitled to have your insurance company provide several duties to you. If a company should violate any of these duties, it may constitute bad faith—and necessitate a lawsuit.
If an insurance carrier fails to fulfill their obligations to the policyholder (the duty to investigate, indemnify, and defend), this can be a serious problem. In the state of California, insurance companies are legally required to operate in good faith. Under this duty of good faith, the insurance carrier must uphold certain standards and obligations when dealing with claims made by policyholders.
First, an insurance company has the duty to undertake a thorough investigation of your claim. It then owes you a comprehensive report of its findings as well as a valuation. It should also act as quickly as possible, without unreasonable delays. If a company fails to do any of these things, it may have acted in bad faith.
Insurers also owe a duty to pay a judgment or a settlement agreement that has been made against a policyholder. This is a basic tenet of insurance law, and is one of the major reasons why many people buy insurance policies in the first place. Failing to uphold this duty could be an example of bad faith.
If someone makes a claim against you, the insurance company has a duty to defend you against this claim in court. This holds true even if the lawsuit against you is not necessarily covered by your insurance policy. If an insurance company refuses or does not adequately defend a policyholder against a claim, it may have failed to fulfill its legal duty. In some jurisdictions, insurers also have a duty to offer a reasonable settlement if a lawsuit would be harmful to the policyholder.
How Long Do Insurance Companies Have to Respond to Claims in California?
If you have to make an insurance claim in California, you should expect it to be investigated within a reasonable amount of time. Every state sets requirements for how long insurance carriers have to respond to claimants. In California, insurance carriers have 15 days to acknowledge that a claim has been made. Once they have acknowledged a claim and received all documentation and proof from the claimant, the insurance carrier will have 40 days to approve or deny the claim. If a settlement is reached between the insurance carrier and the claimant, then the insurance carrier has 30 days from the date the settlement is reached to pay the agreed-upon amount.
The idea behind setting laws in these situations is to ensure that a person who has sustained an injury or property damage receives coverage in an adequate amount of time. Having to wait indefinitely can be detrimental in these situations, though insurance carriers have proven more than willing to delay claims as long as possible.
Breaching Duty of Care
The last thing that anybody should have to worry about when they need to make an insurance claim is that their insurance carrier will not follow the law. Unfortunately, there are times when insurance carriers breach the duty of care that they owe to their policyholders. In these cases, it may be necessary to secure a bad faith insurance attorney to file a bad faith insurance claim against the insurance carrier.
Insurance carriers could also be guilty of bad faith insurance practices if they:
- Fail to pay a settlement or judgment against their policyholder up to the coverage limit.
- Fail to properly defend their policyholder against any claim, including lawsuits that are not necessarily covered by the policy.
- Fail to explore settlement as an option for the policyholder in the event that further lawsuits would expose the policyholder to damages beyond the coverage limits.
If an insurance carrier is found to be guilty of bad faith insurance practices, then the person harmed by the carrier could be entitled to various types of compensation. This could include:
- Coverage of any medical treatment or therapy that a person was forced to pay out-of-pocket.
- Any lost wages a person suffered if they could not work.
- Attorney’s fees for pursuing a bad-faith lawsuit.
- Possible pain and suffering and emotional distress damages.
In some cases, insurance bad faith victims could have the right to pursue punitive damages against the carrier as well, particularly at the insurance carrier acted intentionally or if they were grossly negligent in their actions against the policyholder.