Most men and women in America maintain insurance of some type. They may have healthcare coverage, auto insurance, a homeowner’s policy, and long-term care insurance, among others. The insurer agrees to protect the policyholder from damages or losses in exchange for premium payments. However, policyholders are often surprised to learn the insurance company will not pay their claim in certain situations.

The insurer states the damage is not covered by the policy owned by the individual or provides another reason for failing to pay. How can an individual know when they should pursue the matter? It isn’t always easy to know when an insurer is acting in bad faith. The Miller Law Firm handles cases of this type regularly and offers the following information for individuals who want to know more about whether they have a case against the insurer.

Types of Bad Faith Insurance Claims

The state of Georgia recognizes first- and third-party bad faith insurance claims. When an insurer fails to pay a claim, doesn’t investigate the claim, or refuses to handle it when a policyholder makes the claim because they have sustained a loss, this serves as a first-party insurance claim. In contrast, a third-party claim is when a claim is filed against a policyholder and the insurer fails to protect its client from the claim.

The Rights of the Policyholder

An insurance company must pay claims for losses covered under the insurance policy if the policyholder made all premium payments as agreed. The insured is entitled to a quick response when a claim is filed. Insurance companies might refuse to answer questions or delay providing responses when a question is asked. The company must respond to the claim in a timely manner and cannot find ways to extend the claim period. For example, the insurer cannot request additional documentation to delay the payout. If the company does so, it is acting in bad faith.

When a claim is denied, the insurance company must provide the policyholder with an explanation as to why it did so. This explanation must include information from the policy that supports the decision. A good example of this is when an insurer denies a claim for flooding. Certain types of flooding may be covered by the policy, such as when it is the result of a burst pipe. In contrast, flooding as a result of the weather isn’t covered in the policy. If an expert can demonstrate the flooding was caused by the burst pipe, the company must pay out or explain why it won’t cover the loss.

The insurance company is required to make an effort when a claim is filed. When someone files a lawsuit against a policyholder, the insurance company must try to reach a settlement of a valid claim. Doing so allows the policyholder to avoid a liability judgment. A failure to do so on the part of the insurance company demonstrates it is acting in bad faith.

Penalties

If an insurance company acts in bad faith and is found guilty of doing so, the policyholder is entitled to an amount equal to the loss they sustained. To prevent insurance companies from engaging in similar behavior in the future, Georgia law states the insurance company must also pay the policyholder $5,000 or an additional fine of 50 percent of the loss liability, whichever is greater. In addition, the insurer becomes responsible for any reasonable attorney’s fees incurred by the policyholder in pursuing this matter.

When you suspect your company is acting or has acted in bad faith, speak to an attorney. No insurer should withhold payment on a valid claim if a policyholder has paid their premiums as agreed. Insurance is purchased to protect the policyholder from losses. An attorney becomes of great help in ensuring that it does.

Review Georgia Laws: Know Your Rights and How to Deal with Insurance Companies Acting in Bad Faith?.

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