Is your insurance company acting in bad faith?

When we make regular payments for our insurance premium, we believe that  our insurance company will be there for us when we need them most.  Right?  After all, isn’t that why we spend thousands of dollars every year on insurance? Like a friend, we expect our insurance company to respond in good faith.

Unfortunately, when clients call me about their initial experiences after a serious car crash or bike crash (yes, car insurance often covers your accidents on a bicycle), they are confused and disappointed. They ask me why their insurance company of many years is suddenly acting like a stranger, refusing to pay medical bills or is delaying an investigation about their accident. These actions often are considered “bad faith” because insurers are supposed to act in their insureds’ best interest. The issue is that these insurance companies are usually multi-billion dollar companies that need to show impressive numbers to their shareholders. Sadly, insurance companies are more interested in making and keeping money rather than paying it out in the case of legitimate insurance claims.

Fortunately for policyholders, Washington has some of the strongest laws in place to protect against insurance bad faith. As a brief introduction, we have the Washington State Insurance Fair Conduct Act (“IFCA”) and the Consumer Protection Act (CPA). Most of the issues people have with their insurance companies arise from an insurance company’s:

1. Failure to Investigate the Claim: Insurers in Washington  have a duty to investigate claims in a detailed manner to make an evaluation.  If an insurer refuses or delays for over a month its investigation, then denying coverage this is typical conduct of bad faith .
2. Persistent Lack of Communication: Insurers should communicate with policyholder in a prompt manner. If you were just involved in a bad accident, and you already called your insurer, your insurance company should contact you within a day or so to provide you with guidance on how to recover. If you find yourself calling and leaving voicemail with no response or unhelpful responses, this also is a sign that your insurance company is handling your claim in bad faith.
3. Unreasonably Delays in Processing: As mentioned above, your insurance company should process your claim without unneeded delay. After all, you need to put the matter behind you and get the claim resolved ASAP. If an insurance company drags out the process for months on end, this is yet another sign of insurance bad faith.
4. Outrageously Low  Settlement Offer: Most Insurance claims are resolved through settlements. Insurance companies notoriously offer a lowball number because many policyholders do not know better to retain an attorney because they are concerned that hiring one will lose them money. In fact, insurance companies routinely shift the settlement amount to a higher range as soon as they are dealing with an insured’s attorney. If you were badly injured in a car accident, had to take time off from work , and needed to buy a new car or pay a large bill for repairs, you are better off having your attorney represent you in order to get the best result.
5. Refusal to Pay a Valid Insurance Claim:  When an insurance company flat out refuses to pay a valid claim, this Is bad faith. With enough evidence of IFCA violations, your attorney can obtain additional damages on your behalf under IFCA and the CPA.

There is a reason why we hear the term “ bad faith” in the context of insurance companies. Even highly educated and sophisticated individuals do not realize that their own insurance companies are not looking out for their policyholders but are focused on increasing their profits and revenues.  Please remember this if you or anyone you know is ever in a situation that requires making an insurance claim.

If you have questions, please feel free to reach me via email at cf@cfleminglaw.com.

A Korean version of this appeared in SeattleNon 12.30.2021.