What is a Bad Faith Lawsuit?

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Just as insurance policyholders are required to act in good faith by paying premiums and honoring contract commitments, virtually all insurance carriers are required to act in good faith by settling, evaluating or responding to claims.

If an insurance company fails to honor these commitments, they act in what is known as “bad faith.”  The most common examples of bad faith include the following:

  • Unfairly denying a claim
  • Failing to pay or deny a claim in a timely manner
  • Requiring unreasonable paperwork to settle a claim
  • Failing to explain why a claim was denied
  • Failing to defend a policyholder against a claim.

However, keep in mind that, if an insurance company denies a claim due to a mistake or judgment error, the denial does not qualify as bad faith.

If your insurance company has acted in bad faith, you may take legal action in the form of a lawsuit. However, suits for bad faith can be very complicated. To be successful, they require proving that the insurer failed to make a thorough investigation, ignored or missed obvious facts or intentionally carried out an inadequate investigation.

In a successful bad faith lawsuit, a policy owner can recover the amount that the insurance company should have originally paid out in addition to “consequential” damages — any extra costs that arose after the claim was denied.

After a serious car accident, you may need to seek compensation for medical bills, lost wages and other damages but doing so can be a difficult and confusing process. Speak with the experienced Baltimore car accident lawyers at LeViness, Tolzman & Hamilton, P.A. for assistance.