What Is an Example of Bad Faith?

August 15, 2024

“Bad faith” is a term used to describe an insurance company’s unreasonable delay, denial, or underpayment of a claim.  But what is an example of bad faith? What exactly does it mean?

Quite simply, the term bad faith refers to the actions of an insurance company that don’t follow through on the terms of a policy when a claim is submitted.

Examples of insurance bad faith tactics include:

• Altering policy terms after a claim is filed
• Strong-arming policyholders to sign documents that reduce payments without complete explanations
• Coercing/paying doctors to testify that certain health procedures are unnecessary
• Creating submission deadlines that aren’t part of the policy
• Delaying/denying claim payments without valid reasons
• Failing to fully investigate claims and making decisions without all the facts
• Neglecting to notify policyholders about coverage aspects that could increase payouts
• Ignoring policyholders’ (or their attorneys’) questions
• Misrepresenting policy language to cause confusion
• Stalling the payout process by requesting multiple documents without valid reasons
• Threatening policyholders with legal action for questioning claims payouts or for making harmless errors
• Trying to negotiate reduced payouts, even though the policy requires full payment.

What Is Considered Bad Faith?

Just because an insurance company denies a claim, this doesn’t mean it’s bad faith. Oklahoma Statute §36-1250.5 states that insurance companies must participate in unfair claim settlement practices in order to be guilty of bad faith. Simply being rude or disrespectful does not constitute bad faith. Insurance companies must treat you unethically or illegally to create a bad faith situation.

If you are unsure whether your insurance company acted in bad faith, engaging a bad faith insurance claims lawyer may be in your best interests.

What Are the Elements of Bad Faith?

The concept is confusing. Honest mistakes by insurance companies are not bad faith. The courts must see evidence that the insurance company behaved in a purposeful manner to create an unfair situation. A key element of bad faith requires that the insurance company has intent to try to cheat or harm policyholders in the settlement.

Another important element involves the insurance company’s causing financial hardship. The impact on the policyholder is an important factor in determining bad faith.

Specific Bad Faith Examples

Auto Insurance Claims

Policyholders making claims after damage in a hit-and-run crash expect to be reimbursed (minus their deductible) for their damages.

Often, insurance companies approve only partial reimbursement.  For example, assume you are in a hit-and-run accident, but six months earlier you submitted a claim for weather-related damage. When you submit your new claim, they state, without investigating, that some of the damage was the same as the weather damage previously submitted. However, if they conducted a thorough investigation, they would know that your weather damage was fully repaired, and your car was in “like new” condition prior to the hit-and-run.  Working with an auto insurance claims lawyer who knows how to refute these actions is important.

Health Insurance Claims

We rely on health insurance to protect us from the costs of medical treatment. Should a policyholder become incapacitated and need emergency surgery, they would expect their company to provide coverage.

During the surgery the physician may realize that multiple procedures are necessary to fully restore the health of the injured. Some insurance companies, once learning this, will deny the claim on the initial surgery, citing policy that states the insurance company needed to be notified ahead of time. This tactic is used in preparation for refusing future related surgeries by setting a precedent.

In denying this claim, the insurance company purposefully fails to disclose that the policy waives the pre-authorization rule in emergencies. An experienced health insurance claims lawyer can decipher the policy and hold the insurance company accountable. Withholding policy information is a clear example of bad faith.

Home Insurance Claims

Water damage from burst pipe claims is common. Once the insurance company is notified, they should send an adjuster to inspect the damage. Often, property owners wait weeks for this visit. By the time the adjuster inspects the property and writes a report, new damage (like black mold or poor air quality) may appear, all because of the investigation delay.  Because property owners cannot receive payment to effect repairs until after the inspection, additional damage results. Insurance companies are known to deny these secondary claims.

A reputable homeowners insurance claims lawyer will seek to show that the insurer acted in bad faith by delaying the investigation and denying payment for the extra damage. This professional can help file suit for reimbursement for the total repairs necessary.

Threats Over Making a Claim

Those preparing to make accident claims may contact their insurance companies to request the forms necessary.  The representative may send the forms but fail to provide completion instructions. Instead, they may instruct the policyholder to be careful with the submitted information, sharing errors, including something as simple as an incorrect date, may result in a case of insurance fraud and lead to criminal charges.

Those uncertain regarding the facts surrounding their accidents and claims may be convinced not to file. When insurance companies make statements that are untrue or are only partially true to convince individuals to halt the claims process, they are acting in bad faith

Doug Terry Law Protects its Clients

We Represent Victims of Bad Faith

Attorney Doug Terry appreciates the toll bad faith actions take on insurance policyholders. They reasonably expect that their claims will be paid promptly and in full and often find themselves disappointed.

Insurance companies regularly place profitability ahead of customer care, leaving policyholders struggling financially because their claims were not appropriately reimbursed. Oklahoma policyholders do not need to accept their insurance companies’ initial responses as final — they can appeal. The process is complicated and time consuming, however.  Ultimately, engaging legal representation can help maximize settlements and appropriately address bad faith.

Providing Experienced and Compassionate Representation

When it comes to disputing insurance claims, insurance companies have a significant advantage. As a layperson, you simply don’t have the knowledge of the law or experience in the process to pursue your dispute appropriately.

Doug Terry understands this.  In fact, he began his career representing insurance companies.  Over time he recognized the disadvantages of policyholders and founded a firm committed to providing policyholders the same quality representation as the insurance companies.  His knowledge and experience are considerable, and his approach to service focuses on each client’s specific needs. He and his team understand that while these decisions are “just business” for the insurance companies, they are incredibly personal for their policyholders; delays, denials and underpayments can be emotionally overwhelming and financially devastating.

Mr. Terry’s dedication to those in Oklahoma facing examples of bad faith is unparalleled.  He works tirelessly on his client’s behalf.  As a testament to his commitment, he offers all potential clients a free consultation. Contact the firm today at 405-463-6362 to schedule yours and learn how they can help you.