Car Insurance Companies and Bad Faith

Naturally, all insurance companies want to maximize their profit margins. After all, businesses operate to make money, and insurance companies are businesses. As such, they use questionable tactics like low settlement offers and aggressive negotiation strategies to pay claimants as little as possible.

They might also twist the words of their claimants or catch them saying something they don’t mean. Insurance companies are also notorious for telling claimants that they don’t need a car accident lawyer because they will take care of them.

Sometimes, insurance carriers even engage in dishonest behavior or cross the line in other ways. When they do this, they are said to be acting in bad faith. Bad faith is against the law. Most jurisdictions in the U.S. have some version of an Unfair Claims Settlement Practices Act, such as the statutes in Florida.

Car insurance companies must abide by their policy with you, which serves as a contract between both parties. It spells out the rights and responsibilities of each party. Just like you are expected not to defraud your insurance company or lie to your adjuster, the insurance company owes you the same.

The key is to recognize what might be bad faith and bring it to the attention of a skilled insurance attorney. Depending on the specifics of the situation, you can have grounds to file a legal claim against the insurer. If they lose in the lawsuit, the insurance company might have to pay punitive damages. These damages exceed what they should have paid you in the first place.

What Constitutes Insurance Bad Faith?

Auto insurance companies have a legal duty to act in good faith. Simply put, they must treat you fairly and reasonably. They operate in “bad faith” when they don’t uphold their duty to act in good faith. It’s against the law in the U.S. for insurance carriers to use bad faith tactics.

However, it’s essential to recognize what constitutes bad faith and what doesn’t. Sometimes, insurance adjusters can be disrespectful, impatient, and downright mean. Even though these are rude and inappropriate behaviors, they are not bad faith actions.

Unfortunately, many insurance companies train their adjusters to negotiate aggressively. Remember that they are representing their employer (that is in business to make a profit) and attempting to protect their best interests. However, if the adjuster isn’t honest in their negotiations, doesn’t return your calls, or won’t offer a reasonable settlement, they might be participating in bad faith practices.

Bad Faith: First-Party versus Third-Party Insurance Claimants

Many states only allow individuals to file a legal claim against an insurer for bad faith involving first-party insurance claims. In other words, state laws only permit someone to file a lawsuit against their own insurer for bad faith or other unfair insurance practices.

However, not every state allows injured parties to take legal action against an at-fault driver’s insurance company. Even if state laws prevent a third-party claim, other remedies may be available to the claimant for bad faith insurance practices.

The good news is that Florida law allows both first- and third-party legal claims by statute. So, you have legal rights, whether you file a claim with your own insurance carrier or with that of a party liable for your car accident.

Bad Faith Insurance Practice Examples

#1. Intentionally Misrepresenting Important Facts or Policy Provisions

When filing a claim under your insurance coverage, the adjuster must tell you all the available coverages in your policy. For instance, you probably have Med Pay coverage covering immediate medical expenses, even when the other driver is at fault. It will be illegal for the claims adjuster to inform you that you have no coverage if another driver is to blame for the accident.

If you’re making a third-party claim against the other driver’s insurance policy, their adjuster must abide by the same honesty standards.

However, the adjuster isn’t legally obligated to tell you the policy limits without the insured’s permission. Still, they also can’t lie about the insurance coverage. So, for example, if your damages are for $30,000, the adjuster can’t lie and inform you that there’s only $15,000 in coverage if the policyholder has more than that in coverage.

#2. Failing to Promptly Settle a Claim With Reasonably Clear Liability

Suppose a motorist rear-ended you, and they admitted to the responding police officer that they were using their phone right before the accident. They stated that it was too late to stop in time to prevent an accident by the time they looked up from their phone. The police officer cited them for following too closely and distracted driving.

In this case, the driver’s liability or legal responsibility for the crash is evident. Yet, your injury claim remains up in the air for months. When you ask them, the adjuster explains that they are still investigating the details of the crash. In this situation, liability is abundantly clear, and the other driver’s insurance is relying on bad faith tactics to delay your claim.

#3. Making Unreasonable Demands for Medical Records or Other Documents

When the adjuster repeatedly requests medical records or other documents that you have already given them or asks you to provide personal information unrelated to your claim, they can be violating insurance laws.

Additionally, suppose the adjuster misrepresents the reason for the requests by telling you it’s per state law or policy requirements. In that case, this is also a bad faith action. You must only provide them with medical records directly related to your current injuries.

#4. Forcing You to File Suit to Obtain Full and Fair Compensation

When the insurer refuses to offer a reasonable settlement or denies your claim altogether, you may have no alternative but to pursue filing a lawsuit against the at-fault driver to receive the compensation you deserve for your injuries and damages. If your case against the at-fault driver is successful, you might pursue a bad faith claim against their insurance company for bad faith, as the first lawsuit establishes that the insurance company didn’t negotiate your claim in good faith.

Recommended Read for You: What to do when the car insurance denies your claim

#5. Failing to Defend the Insured’s Interests

Your auto insurance carrier must defend you after an accident, even if it was your fault. This includes paying for defense attorneys and depositions and other litigation expenses if necessary. If your insurer fails to protect your interests, according to your policy language, you may have reasonable grounds for a bad faith action.

Real-Life Example of Insurance Bad Faith: Defective Repair Parts

In 2014, then Louisiana Attorney General Buddy Caldwell filed a lawsuit alleging that State Farm Insurance was improperly forcing auto body repair shops to install unsafe parts on vehicles, thereby endangering consumers’ lives. At a news conference to discuss the lawsuit, Caldwell explained that State Farm created a “culture of unsafe business practices,” in which consumer vehicle repairs are performed with “cost savings” as the chief goal instead of safety and reliability as should be.

Forcing drivers to unknowingly use “after-market” or “junkyard parts” is hazardous. These parts often don’t fit the vehicle properly or are damaged to start with. Insurance companies contract with “direct repair program” shops to do work as economically as possible in an attempt to defray their repair costs. State Farm told consumers they will only pay for the less expensive parts. If the vehicle’s owner wanted new parts made by the manufacturer, they had to cover the price difference out of their own pockets.

The lawsuit accused State Farm of violating the state’s Unfair Trade Practices Act by directing claimants to particular auto body repair shops.

Other allegations included:

• Insurers who tell customers they will need to pay more at “non-select” repair shops.
• Repairs will not be guaranteed.
• The insurance company won’t cover the costs if the repair takes longer to complete than the shop’s software originally estimated.

The lawsuit sought civil penalties of $5,000 per violation by law and restitution for additional costs paid by consumers who opted for OEM (original equipment manufacturer) parts. Although Louisiana was the first state to file a lawsuit of this sort, this problem made its way into Central Florida. It became a national problem that sometimes still occurs today.

In light of what happened, drivers became a part of a legal battle pitting many Florida body shop owners against insurance companies like State Farm. Will Dunn’s insurance company guaranteed to return his vehicle to its “pre-loss” condition after the claims adjuster suggested he use the company’s preferred body shop. After noticing gaps in his Nissan’s rear seams, he became suspicious about the repair work. Upon further inspection, his suspicions were confirmed by Gunder’s Auto Center when they found an entire area of its frame kinked and smashed.

In Lakeland, Florida, Gunder’s Auto Center became one of the 20 Florida collision repair facilities that filed a lawsuit against 30 insurance companies serving Florida motorists. In addition, the complaint alleged a pattern of coercion forced shops to use shortcuts on repairs to defray costs for the insurance company. This bad faith practice puts the drivers of these cars at serious risk of injury or even death.

Assistant Attorney General at the time, Stacie deBlieux, explained that the lawsuit named State Farm because it was the largest auto insurer in the state, handling almost 34 percent of all policies at that time. She hoped that other insurance companies will adjust their business model to conform to better practices.

Insurance Company Penalties For Bad Faith

When an insurer has conducted themselves in bad faith, a judge or a jury often awards punitive damages, also often referred to as extra-contractual damages in these types of cases. You likely won’t find an insurance carrier that will readily admit to bad faith and hand over additional money outside of a court order.

Extra-contractual means a bad faith insurer must pay these kinds of damages on top of the compensation it provides for the underlying car accident claim.

Court awards for bad faith might include:

• Monies for your injury claim, which is the amount of the applicable policy limits- for example, if the at-fault party’s insurance policy was for $30,000, that is the most you can recover.
• A monetary award serving as a penalty for the insurance company’s bad faith actions- an award over and not dependent upon the policy limits
• Your attorney costs and legal fees

Since the court awards extra-contractual damage to punish the insurer, they:

• Penalize a person or party
• Deter other parties from acting in the same manner

Consult a Knowledgeable Personal Injury Attorney

You have a right to fair dealing from any car insurance company, whether it’s your own or the at-fault party’s. Insurance companies have many reasons to work with their claimants and ensure their claims adjusters only act in good faith. It should go without saying that bad faith allegations hurt an insurer’s reputation. But, as if that isn’t costly enough, bad faith lawsuits are expensive to defend, especially if the insurer loses and the court orders them to pay the claimant punitive damages.

Yet, there are still times when an insurance company deliberately won’t willingly work with an injured claimant. If this happens, contact an experienced car accident attorney for sound legal advice. While you can try and represent yourself in your claim, it is seldom a good idea.

An experienced personal injury lawyer can draft a letter on your behalf asking for a reasonable settlement. Your attorney will know Florida’s insurance laws and can recognize any bad-faith behavior from an insurance company. The insurance adjuster also knows that and may offer a fair settlement to avoid further legal problems since you have hired legal representation.

If you were injured and believe an insurance company is acting in bad faith, call an auto justice lawyer today for your free consultation and claim evaluation.