Bad faith consists of failing to abide by an obligation of loyalty or the implied covenant of good faith and fair dealing. Insurance companies have a legal responsibility to act in good faith and treat insured individuals with fairness as outlined by their contractual agreement with the insured.
Insurance Contracts Must Be Drafted in Good Faith
When you purchase an insurance policy, you are creating a business contract between you and the insurance carrier. You are bound to pay monthly premiums or face the consequences of possible coverage cancellation. The insurance carrier, on the other hand, has the contractual duty to settle any claims in a timely manner and use honest business practices in doing so, or they are in violation of the contract.
What Bad Faith Insurance Looks Like
If the insurance company does not act in good faith, you may have the right to sue them for damages. Just a few examples of bad faith may be the following:
- Unreasonable delay in resolving a claim
- Improper standards to deny your claim
- Did not make a thorough or timely investigation into your covered claim
- Denied payment without a reasonable basis
You may ask why an insurance company would operate in an unethical way. Please keep in mind that your insurance company makes money by investing the monthly premiums collected from policyholders like you rather than paying out their clients’ claims. By minimizing the amount of money they pay out, or even denying the insured claimant payment altogether, insurance companies can keep more money in their own pockets when that money should be in yours.
Elements of a Missouri Bad Faith Action
In Missouri, the elements of an action against an insurer for bad faith refusal to settle include the following:
- a policy of insurance issued to the plaintiff
- reservation by the insurer of the exclusive right to contest or settle any claim under the policy
- prohibition of the insured from voluntarily assuming any liability or settling any claims without the insurer’s consent
- assertion of a claim against the insured
- refusal of the insurer to settle the claim within the limits of the policy
- fraud or bad faith by the insurer in refusing settlement
- judgment or settlement against the insured in excess of the policy limits
The damages recoverable in an action for bad faith refusal to settle usually consist of the sums the insured plaintiff was obliged to pay either by judgment or settlement with the claimant, but may also include emotional distress, attorney’s fees, and other damages directly attributable to the refusal to settle. In Missouri, you have five years to file an action for bad faith refusal to settle.
If you have experienced bad faith from your insurance company, please contact Foster Wallace so that we can protect your rights and get you the money you deserve.