Insurance Bad Faith

What Is Insurance Bad Faith? 

Insurance bad faith occurs when an insured party’s insurance company fails to honor its obligations under an insurance policy. As outlined in Nevada 686A.310,this may include refusing to pay a valid claim, delaying payment without a reasonable basis, undervaluing a claim, or failing to provide the legal defense the insured is entitled to receive. When this happens, claimants and insureds suffer and often have the right to file a lawsuit against the insurance company for bad faith. 

The term “bad faith” refers to an insurance company’s failure to act fairly, honestly, and reasonably toward its policyholder. Every insurance contract contains an implied covenant of good faith and fair dealing, which requires insurance companies to handle claims properly, investigate claims thoroughly, communicate honestly, and give equal consideration to the interests of the insured. When an insurer fails to uphold these obligations by unreasonably delaying, denying, or underpaying a valid claim, or placing its own financial interests above the rights of the policyholder, it may be considered a violation of this covenant of good faith and fair dealing and constitute insurance bad faith. 

Individuals and businesses purchasing insurance in Nevada are entitled to the financial and legal protection for which they have paid. They purchase insurance to protect themselves against a variety of financial risks and exposures including: 

• Automobile insurance to protect against the risk of claims and lawsuits by others (liability insurance) and to pay damages that the insured may suffer (medical payments, collision coverage, and uninsured motorist coverage)
• Disability coverage, both long-term and short-term, to protect an individual in the event they become disabled and are unable to work
• Homeowners insurance to protect against the risk of losing a home and its contents as well as also protection against financial exposure of claims by anyone who may be injured on the property
• Business insurance to protect from claims made against the business, protection from losses due to the interruption of the business’ operations and protection against loss of business assets. 

If your insurance company has wrongfully delayed, denied, or underpaid your claim — whether it involves car accident insurance claims, workers’ comp denied claims, or any other policy — you may have legal options. Contact Friedman & Throop to schedule a free consultation and have an insurance bad faith attorney review your policy, evaluate the insurer’s conduct, and help you pursue the compensation and protection you are entitled to receive.

Examples of Insurance Bad Faith  

Insurance bad faith can take many forms, and it is not always obvious at first. While an insurance company may claim it is still reviewing your claim or that the policy does not provide coverage, its actions may be unreasonable, unfair, or intended to avoid payment. If you are dealing with delays, confusing explanations, low settlement offers, or a lack of communication from your insurer, these may be signs of bad faith. Examples of insurance bad faith include: 

• Denying a valid claim without a reasonable explanation
• Unreasonably delaying payment or investigation of a claim 
• Failing to properly investigate the facts
• Misrepresenting policy terms or coverage
• Providing misleading information concerning any applicable statute of limitations
• Advising the insured not to seek legal counsel
• Offering far less than a claim is reasonably worth
• Refusing to defend the insured in a covered lawsuit
• Failing to communicate with the policyholder
• Ignoring evidence that supports coverage
• Pressuring the insured to accept an unfair settlement
• Canceling or changing coverage after a claim is filed
• Attempting to settle claims using altered documents without the policyholder’s knowledge 

If you believe your insurance company has acted unfairly or failed to honor the terms of your policy, it is important to contact an insurance bad faith attorney. With over 45 years of combined experience serving the Nevada area, our firm understands the tactics insurance companies use and has helped many policyholders receive the benefits and compensation they are owed. 

Do You Have A Bad Faith Claim Against An Insurance Company?

Bad Faith Claims

Every insurance contract between the insured and the insurer is an inferred obligation to act in good faith. Nevada’s courts have defined the relationship between insurance companies and their policyholders as fiduciary, meaning the relationship requires engaging in trust and good faith and upholds the obligations required under contract. Generally, insurance bad faith constitutes delaying, withholding, or denying the policyholder benefits that are based on legitimate claims filed under valid insurance policies.

Insurance companies must:

• Pay or deny the claim within a reasonable period of time. 
• Provide prompt response to their questions and concerns. 
• Not unnecessarily delay the adjustment of the claim or require unreasonable paperwork as a means of extending the claim period.
• Explain the reason for denial and the policy provision supporting that denial. 
• Maintain their obligation to protect the insured by timely settling a valid claim rather than subjecting an insured to an excessive liability judgment. 

Liability Insurance Claims

In liability insurance, the insured buys protection from claims and lawsuits by others for the insured’s negligence. When the insurer fails to pay or denies the claim in bad faith, the insured suffers not only the covered loss, but also the threat of considerable financial exposure. For this reason, the recovery for bad faith in the liability context is broader, and compensation is often greater.

The courts have indicated that bad faith may be a dishonest purpose, implied conscious wrongdoing, and even negligence. When the insurer fails to settle the claim of an injured person on behalf of its insured due to its own negligence, fraud or bad faith, then the insurance company may be liable. The jury must consider whether the insurer has given the insured the same faithful consideration it gives its own interests.

We’re Here To Help You Recover Damages

Lawyers Julie Throop, John Boyden and Terry Friedman are experienced in helping with bad faith insurance claims in Nevada. It’s an actionable wrong when the insurance company breaches contractual duty to act in good faith. If the insured has suffered damages at the hands of their insurance company, compensation through a lawsuit may be awarded. Different types of compensation for insurance bad faith claims may include:

Contract Damages

• Unpaid or Underpaid Claims: Compensation may include the full value of benefits wrongfully withheld under the insurance policy.  

Extracontractual Damages  

• Legal Fees: Policyholders may be able to recover attorney fees, court costs, and other legal expenses incurred as a result of pursuing a bad faith claim. 
• Other Out-of-Pocket Expenses: In addition to legal fees, you can recover expenses incurred as a direct result of said bad faith practices, such as temporary housing costs, transportation expenses, or medical expenses. 
• Mental Suffering and Emotional Distress: Policyholders may be compensated for anxiety, stress, or loss of peace of mind caused by bad faith practices.

Punitive Damages

 If an insurance company’s actions are particularly fraudulent, reckless, or malicious, the insured may be awarded punitive damages to punish the insurer and discourage future misconduct.    

Schedule a Free Consultation With an Insurance Bad Faith Attorney

The bad faith failure of an insurance company to meet its obligations under the insurance policy can have devastating consequences for an individual or business. If you believe you may have a bad faith insurance claim in Nevada, we can help you get the answers and justice you deserve. Call  775-322-6500 today to schedule a free consultation with an insurance bad faith lawyer at Friedman & Throop.