Insurers owe their policyholders a number of duties. Among these is the general duty of good faith. Insurers must act in good faith towards their policyholders when handling their insurance claims — this duty is imposed on insurers because they have specialized knowledge that gives them an unfair advantage in the claim evaluation and payout context. Bad faith, however, does not exist and apply to insureds in every state. Some states have either common law or statutory bad faith law, which gives insureds the right to file a lawsuit against an insurer based on that legal theory.
If an insurer violates their duty of good faith, you are encouraged to seek legal help from one of our Chicago disability claim attorneys. If you purchased your policy in a state where there is bad faith law, the insurer may be liable for significant compensatory damages. In particularly egregious cases, you may be able to bring a separate fraud claim and the court may award punitive damages.
Bad faith conduct includes, but is not necessarily limited to:
- Fraud and other knowing misrepresentations
- Unreasonable delays in claim processing
- Intentional interference with claim processing
- Wrongfully denying a legitimate claim in order to force the policyholder to expend additional effort through litigation
- Refusing or failing to payout benefits (for an accepted claim)
- Failing to adequately investigate the submitted claim
- Failing to maintain consistent communication with the policyholder
- And more
Generally speaking, the court will find bad faith if the insurer has conducted themselves in a vexatious, unreasonable, or outrageous manner. They will make this determination on the basis of the total circumstances — for example, if the insurer failed to payout your benefits, but an investigation reveals that they simply had the wrong address and contact information in their system, it is unlikely that the court will find the insurer liable for bad faith (though they will almost certainly order the insurer to make the necessary payments).