Bad Faith Insurance

Tulsa Bad Faith Insurance

Bad faith insurance is a term used more commonly in a legal setting than the secular. An act of bad faith refers to an insurance company mishandling a claim. All insurance companies owe a duty of good faith to their clients and claims. When an insurance company fails to treat policyholders reasonably or fairly, a claimant may have a case of bad faith.

Does Oklahoma Have Laws That Prohibit Bad Faith Insurance?

In Oklahoma, there are rules and regulations that prohibit bad faith practices under contract law. As an extension of The Consumer Protection Act, individuals are protected from entering into unfair contracts. Insurance companies are required to act in good faith. Failing to do so can have severe legal consequences.

What Constitutes Bad Faith Insurance?

To act in good faith is a fundamental law in the insurance industry. Whether the individual is a policyholder or a claimant filing against a client’s policy, an insurance company is obligated to treat all claims in good faith.

What is an Insurance Company’s Duty of Good Faith?

An insurance company’s duty of good faith begins before a client becomes a policyholder. Insurance policies are notoriously confusing to read for those outside of the industry. Legal and insurance jargon and the various nuances of different types of policies can lead to many misunderstandings with clients.

Whether a prospect is in the market for health insurance or car insurance, insurance sales representatives are obligated to disclose all relevant information in a contract. Operating in good faith requires the client to be well-informed on their policy details.

In addition, an insurance company is obligated by their duty of good faith to treat every claim with respect and fairness.

What Are an Insurance Adjuster’s Good Faith Obligations?

Oklahoma’s good faith law dictates that insurance companies handle claims in a fair and respectful manner. Good faith is a broad term used to describe various responsibilities owed to policyholders and claims:

  • The insurance adjuster is obligated to handle all claims within the clearly expressed policy limits and exclusions
  • Each claim should be investigated appropriately
  • Legitimate claims are to be accepted in a timely manner
  • Claim payouts should be based on the benefits of the policy

For a payout to be considered fair, the monetary value should include the losses suffered by the claimant.

Is There a Good Faith Obligation for Claim Holders?

Policyholders and other claimants also have an obligation of good faith. Throughout the claims process, clients are required to be honest in everything regarding their case. When applying for the benefits of the insurance policy, acting in good faith means:

  • To answer all insurance adjuster questions fully and truthfully
  • To provide all documents and supportive evidence when asked

Failing to adhere to the above is considered insurance fraud.

What Are Common Examples of Bad Faith Insurance?

There are far too many examples of insurance companies acting in bad faith to list. Individuals and companies look to insurance companies to protect from a wide range of potential disasters and threats.

Types of Personal Insurance Coverage

There are several types of personal insurance policies. The most common occurrences of bad faith involve the following kinds of personal insurance claims:

  • Car accident insurance
  • Homeowner’s insurance
  • Renter’s insurance
  • Disability insurance
  • Life insurance
  • Long-term care insurance
  • Wedding insurance
  • Health insurance
  • Identity theft protection
  • Umbrella policy
Types of Business Insurance Coverage

Companies, especially smaller organizations, need various types of insurance coverages. Smaller business organizations experience bad faith from insurance companies more frequently than larger entities.

Larger companies tend to have an in-house legal staff that can ensure claims are handled and processed in good faith. Unfortunately, smaller businesses experience bad faith insurance practices at the same rate as individuals. One bad faith insurance claim denial can push a small business into bankruptcy.

The types of business insurance coverages most affected by bad faith practices include:

  • General liability insurance
  • Commercial property insurance
  • Business income insurance
  • Professional liability insurance
  • Workers’ compensation insurance
  • Data breach insurance
  • Commercial auto insurance
  • Medical malpractice insurance
  • Commercial umbrella insurance
Examples of Bad Faith Insurance in Tulsa

Insurance companies may act in bad faith if they engage in the following:

  • Failing to process a claim in a reasonably timely manner
  • Denying a claim for reasons not stated in the policy
  • Misrepresent the fair value of a claim
  • Failing to seek a prompt, fair, and equitable settlement when liability is clear
  • Failing to acknowledge receiving the claim
  • Using unsavory or threatening tactics to pressure clients into accepting a lesser value for their claim
  • Withholding pertinent information about the claim
  • Increasing insurance premiums after a claim when the policyholder was not at-fault
  • Advising against hiring representation from an attorney
  • Unfounded accusations of wrongdoing on the part of the claimant
  • Willfully and intentionally misrepresenting the details of the claim
  • Failing to disclose why a claim has been denied or severely reduced
  • Requesting unnecessary information
  • Using delay tactics (e.g., requesting multiple forms of documentation containing the same information and citing failure to submit as a reason for the denial of a claim)
  • Failing to explain the appeals process
  • Making payments without explanation
  • Failing to notify clients of changes to their policy
  • Using high-pressure tactics to settle a claim for less than its actual value
  • Failing to investigate the claim thoroughly and within a reasonable amount of time

While there are several other examples of bad faith practices involving Oklahoma insurance companies, the above illustrates how difficult the claims process can become.

Insurance companies can become engulfed in insurance disputes. In some cases, claimants are unsure if their claim denial or request for more documentation is in good faith or bad faith. Regardless, insurance law dictates fair dealing for legitimate claims.

Are There Remedies for a Bad Faith Insurance Case?

When policyholders or other claimants believe their insurance company is mishandling their claim, there is an available recourse. A policyholder can file an insurance bad faith lawsuit.

Insurance companies are required by law to handle claims in good faith. When an insurance adjuster acts in bad faith, a claimant may be entitled to remedies in civil court.

There are three types of remedies available in a bad faith insurance claim.

Contract Damages

Contract damages are the most straightforward and easiest to calculate. Contract damages consist of the value of the claim that was denied, delayed, or otherwise affected by bad faith practices. In addition, contract damages typically include interest on the value of the claim owed.

Extracontractual Damages

Extracontractual damages involve a wide variety of compensation. Every act of insurance bad faith will affect the claimant differently. In some cases, the purposeful delay or denial of an injury claim can cause financial hardship to the claimant and their family.

After a serious injury, 1 in 8 households will experience severe financial hardship after a family member is hospitalized. Injury victims can become displaced after losing their home. Medical debt is currently the number one reason people file for bankruptcy. Extracontractual damages can recover any economic losses brought on by bad faith.

Additionally, claimants may be entitled to compensation for the emotional distress. The claims process is a complicated system that generally takes months to a year to complete. When legitimate claims are delayed for an extended period of time or denied, claimants can suffer prolonged stress and anxiety.

The effects of long-term stress can result in sleep disturbances, clinical depression, and anxiety attacks. According to recent studies, chronic stress can change a person’s brain chemistry:

  • Stress releases hormones that cause inflammation in the brain
  • Repeated or prolonged inflammation can permanently reduce the production of serotonin (i.e., the mood stabilizer chemical)

A person exposed to chronic stress over the course of a few months to a year can suffer permanent damage that leads to a lifetime of mood disorders. Emotional distress damages can be recovered in a bad faith insurance claim.

Attorney fees are also recoverable under extracontractual damages. Whether it ends in settlement or trial, filing a lawsuit is expensive. If an insurance company acts in bad faith and causes a claimant significant harm, lawyer fees can be included in the compensation.

Punitive Damages

Punitive damages are very different from contractual and extracontractual damages. While the latter is used to recover economic and non-economic losses for the claimant, punitive damages are meant to punish the guilty party.

Not every case of bad faith insurance will involve punitive damages. Only certain circumstances of conduct qualify:

  • The bad faith actions were purposeful or malicious in nature
  • The insurance company committed fraud against the claimant
  • The act of bad faith was oppressive

Punitive damages are a tool used to punish excessive wrongdoing. For example, suppose an insurance investigator willfully conceals evidence during the claims process. The value of the bad faith insurance claim plus extracontractual damages is worth $5,000. However, punitive damages are added in the amount of $5,000.

Punitive damages are meant to make intentional or grossly negligent actions too expensive to repeat. To qualify for punitive damages, acts of bad faith are held to a higher standard of proof.
Generally, the claimant must prove that the bad faith is more than likely true. However, the claimant must provide the court with “clear and convincing evidence for punitive damages.”

The bad faith insurance lawyers of Graves McLain have years of experience assisting individuals with their claims. Schedule a free consultation of the case by calling (918) 359-6600.

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