11 Signs Your Insurer is Acting in Bad Faith
Home insurance companies have an obligation to investigate claims and question policyholders.
However, some insurers take investigations too far and act in “bad faith.”
Good insurance companies treat you fairly and ethically. Bad insurance companies make you feel like you’ve done something wrong.
When does a normal insurance investigation cross into “bad faith” territory?
What’s the difference between a slow claim and a bad faith insurance claim?
Today, we’re explaining the top 11 most common signs your insurer is acting in bad faith.
Denying Your Claim Without Good Reason
If an insurer has denied your insurance claim without giving a good reason, then your insurer could be acting in bad faith.
State insurance laws require insurers to provide a reason for each denied claim. If there isn’t a good reason, then the insurer cannot deny the claim.
Your insurer must also provide documentation for the denied claim upon request. All reputable insurers provide documentation when denying your claim – like detailed information about why your claim was denied. They should send you a denial letter that quotes your policy language to explain the denial to you.
Unusually Long Investigation of Your Claim
Is your insurer taking a long time to investigate your claim? Is your insurer dragging out your claim or demanding excessive evidence with no apparent reason?
It could be a sign your insurer is acting in bad faith. When an insurer takes an unusually long time to investigate your claim, they could be delaying your claim in the hopes you’ll accept a reduced offer. Or, they could be trying to frustrate you, trip you up, or find some excuse to deny your claim.
Unusually Short Investigation of Your Claim
In other cases, the insurer takes too little time to investigate your claim and seems to not care about certain details of your claim.
Your insurer may have preconceived notions of the validity of your claim, leading them to conduct a basic investigation before denying your claim without good reason.
Insurers have an obligation to investigate claims. If the insurer doesn’t adequately investigate your claim within an ordinary length of time, your insurer could be acting in bad faith.
Reducing Your Payment Without Good Reason
You may have expected to get $100,000 for your property damage insurance claim, but your insurer only offers $25,000.
If the insurer provided a reason – like the damage was caused by a non-covered peril – then that may be valid. However, insurers who offer a low payout without providing a reason may be acting in bad faith. Like a denied claim, a reduced claim without good reason could be a lazy attempt by the insurer to save money.
Demanding Excessive Proof
You are required by law to provide proof of the insurance claim to your insurer.
You may provide photos, documents, receipts, videos, and other evidence proving the incident took place and on the date and time it took place.
However, when an insurer demands excessive proof, it could be a sign they’re acting in bad faith.
Insurers may demand excess proof when they’re trying to find a reason to deny or reduce your claim. They may be trying to frustrate you with a lengthy claim investigation. Or, they might make you feel like you’re guilty in the hopes that something turns up during the investigation – even if that thing has no relation to your claim.
Failing to Pay the Agreed Amount
Some insurers practice in good faith through the entire claim process – only to act in bad faith during the actual payment process.
Insurers may fail to pay the agreed amount on the date you expected, for example. Or, in some cases, insurers may fail to pay the settlement within a reasonable length of time at all. The insurer may be dragging its feet on sending out a payment.
In some cases, the insurer has a cash flow problem: if your insurer recently faced a large natural disaster over a large portion of its customer base, for example, your insurer may be struggling to pay all of the claims from policyholders in your area.
Delayed payments could be a sign you have a bad faith insurer – or your insurer nearing bankruptcy. Neither are good for the future of your insurance claim.
Threatening You in Any Way
When an insurer threatens you, it’s a sign your insurer is acting in bad faith.
Insurers may threaten to reduce your claim if you hire a public adjuster, for example. Or, they may warn you against getting a third party estimate for repairs to your home.
In these situations, the insurer is threatening you to protect their own best interests. They want to pay you as little for your claim as possible, so they threaten you and hope you don’t understand your rights as a policyholder.
Denying Your Request for Documentation
As a policyholder, you have certain rights under insurance laws. One of those rights is to receive documentation when you request it.
If an insurer denies your claim, for example, then you can request documentation explaining why your claim was denied.
If your insurer denies your request for documentation, then they may lack a good reason to deny or reduce your claim, which means they’re acting in bad faith.
The insurer may believe you’ll accept the denial or reduction of your claim at face value. Don’t let them think they’ll get away with it.
Attempting to Blame the Policyholder
Bad faith insurers may accuse the policyholder of insurance fraud, claim they failed to maintain their property, or reference multiple parts of the insurance policy to justify a lower payout.
When your insurer attempts to blame the policyholder without good reason for that blame, it’s a sign they may be acting in bad faith.
Their Claim Denial References Multiple Parts of Your Insurance Policy
Insurance policies are complicated, and most homeowners don’t fully understand what they mean. There’s complex terms, jargon, and legalese in your insurance contract.
Insurers may try to take advantage of this fact by referring to multiple parts of your insurance policy. They might assume you don’t understand your coverage, using complicated terms to justify a denied or reduced claim. They often use wording from your contents coverage to deny your dwelling coverage. Make sure you know where the wording is being pulled from in your policy.
Did your insurer cite multiple parts of your policy to justify denying your claim? They may be taking a “throw everything at the wall and see what sticks” approach, overwhelming you with complex terms to avoid paying your claim.
Check your policy thoroughly. Or, consult with a lawyer or public adjuster to verify the policy language.
Poor Communication & Long Response Times
On its own, poor communication isn’t a sign your insurer is acting in bad faith. Some insurers are busy or bad at communicating.
However, insurers have a legal obligation to respond to your concerns in a reasonable length of time. Insurers that fail to do that may be acting in bad faith.
When you contact your insurer to report a claim, for example, the insurer must process that claim within a certain length of time. The specific length of time varies from state to state: some states have a specific limit (like 30 to 60 days) while others simply require a “reasonable” length of time.
A Bad Faith Insurer’s Worst Nightmare: Clients Who Hire a Public Adjuster
Bad faith insurers don’t like when policyholders hire a public adjuster. It means they’re fighting back against their bad faith practices.
When you hire a public adjuster, you’re hiring someone to represent your own best interests in the insurance claim – not your insurance company’s best interests.
Your insurance company has an adjuster, and that adjuster’s role is to pay you as little for your claim as possible.
By hiring your own adjuster, you get someone in your corner representing your best interests. Someone that reads insurance policies every day. Someone that knows what to expect next in the claims process.
Your public adjuster can challenge your insurer’s estimates, negotiate with your insurer on your behalf, provide documentation proving every penny of damage, and fight back against bad faith practices.
Don’t let your bad faith insurer push you around or take advantage of your inexperience.
Schedule a free, no-obligations consultation with a public adjuster today by contacting ClaimsMate.
Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.
