It has come to light in recent years that insurance companies have wronged their policyholders. Throughout the country, policyholders are filing lawsuits against their insurance company because they were wrongfully denied compensation for personal injury related medical expenses.
In these cases it is believed that the insurance companies are acting in bad faith, giving policyholders grounds to pursue compensatory and punitive damages. So what exactly constitutes “bad faith actions” and what can be done about it?
Simply put, an insurance policy is a contract between the insurance company and the person insured, otherwise known as the policyholder. This contract dictates that the insured continually pays premiums for months and years and in return, the insurance company promises to assume the risk if the insured needs to make a claim.
Examples of Bad Faith
Car insurance is a prime example of this, where you continually pay for car insurance but only really use it if you get into an accident and are injured or your vehicle is damaged. If the insurance company breaks its promise to assume the risk when you make a claim it is technically a breach of contract case.
This means you would only be able to recover the amount of money lost because of the insurance company’s failure to pay the claim. But since devastating consequences can come from failing to pay an insurance claim (especially in health insurance cases where a life is at stake), states have come to follow “bad faith” laws that allow the insured to pursue punitive damages.
Bad faith actions are based on the fact that every contract has an “implied covenant of good faith and fair dealing.” This is a legal promise that exists in every contract, whether clearly stated or not. It means that an insurance company cannot intentionally commit acts to prevent the insured from receiving benefits as per the agreement.
When It’s Time to File a Bad Faith Lawsuit
Denying coverage without cause or choosing not to pay a legitimate claim ends up breaching the covenant of good faith and fair dealing. When this happens, you have the ability to pursue punitive and compensatory damages under a bad faith lawsuit. Punitive damages usually end up much higher in a bad faith case than a breach of contract case because punitive damages are meant to punish a defendant for their wrongdoing.
Punitive damages are also meant to keep those defendants from committing the same wrongdoing again in the future. Some states have also included laws that allow for “treble damages,” which means the insured can receive an award that is equal to three times the actual monetary losses that result from the bad faith action of the insurance carrier.
Contact Bad Faith Insurance Lawyers Today
If you have been in an accident and suffered injury and now suspect your insurance carrier of squelching on their promise to assume risk, you should contact an experienced lawyer.
In Alabama, the law firm of Johnstone Carroll, LLC, represents clients in disputes with insurance companies — both personal and commercial lines. With in-depth knowledge and sheer determination, they can help you if you have been mistreated by your insurer.
Contact the firm at 205-383-1809 today to set up a free initial consultation and begin discussing your case today.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.