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Insurance Claim Disputes: Understanding Bad Faith

Insurance Claim Disputes: Understanding Bad Faith

Insurance is a form of risk management designed to protect an individual or entity from financial loss. In practice, insurance companies pool resources from a large group of people or entities exposed to similar risks on the understanding that only a small number of those people or entities will actually incur losses. That’s a fairly dense way to say that a car insurance company uses the premium payments from many people to cover the losses of a few people, for example.

Insurance policies are legal contracts that define the obligations of the insurance company and the insured. The policy details the types and levels of coverage that the insured receives, and lays coverage amounts and costs. However, in addition to the provisions of the policy, insurance companies are obligated to act in good faith to those who purchase coverage.

Bad faith defined

“Bad faith” describes a situation in which an insurance company fails to act in good faith. Examples include not acknowledging a claim at all, improperly valuing a loss, and failure to take appropriate steps to protect the insured from further financial loss.

Though insurance is a necessary and vital part of risk management, insurance companies are flawed in that their first order of business is to protect their own assets. Sometimes, they do so at the expense of a policyholder. When this happens, an insurance company is said to have acted in “bad faith.”

What options are available after a bad faith decision?

When an insurance company has acted in bad faith, you can initiate legal proceedings to recover your losses. Bad faith claims allow a policyholder to sue an insurance company on a tort claim in addition to a standard breach of contract claim. The distinction is important, as tort claims allow for punitive damages while breach of contract claims do not.

Regardless of the circumstances, bad faith cases are complex. Insurance companies employ teams of attorneys to handle litigation that can delay your case for years. When your insurance company has acted in bad faith, you need experienced legal representation on your side. The insurance attorneys at Stipe Law Firm are experienced and educated in bad faith case histories, enabling us to offer you strong representation. We serve all of Southeastern Oklahoma; to schedule a free consultation at our McAlester office, contact us today.

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