Bad Faith Litigation: What It Is, When to Hire a Lawyer, and Why

When you purchase an insurance policy, you expect that the money you spend on your policy will guarantee coverage for you and your family when you need it. In other words: you expect to get what you pay for. Unfortunately, it doesn’t always happen that way.

Insurance companies looking to save money and cut costs often unfairly and illegally adjust, delay, or deny claims at the expense of policyholders like yourself. Rather than acting in good faith and fulfilling their contractual obligations, the insurer looks for any excuse to lie, obfuscate, or give you the runaround.

If your valid claim is denied coverage, your settlement offer is an obvious (and insulting) lowball, you keep getting asked for new documents (or even the same ones) over and over again, or the insurance company slows or disrupts the claim process in any other intentional, dishonest act, you might be a victim of bad faith.

It’s illegal for insurance companies to deny you the coverage outlined in your policy or make the claim process unnecessarily complicated for you, but it happens more frequently than you might expect. Here’s how to know if your insurance company is acting in bad faith and what you should do about it.

What is Bad Faith?

Before talking about bad faith litigation, we need to talk briefly about bad faith.

In short, when you sign a contract with an insurer, they have an implied covenant to act in good faith and fair dealing. Or, in plain English: they have a duty to pay out the benefits they promised and fulfill the terms of the contract without unnecessary delay, whether they like it or not.

Certainly, it’s normal for settlement negotiations to take some time, and for the insured and the insurer to disagree (at least at first) about the value of the claim. But bad faith takes things a step further. Basically, it’s what happens when insurers know that they’re in the wrong, and that they have a duty to investigate or pay out a fair claim in a timely manner—and then fails to do so, because they think they can get away with it.

These actions are illegal in the state of Louisiana. A 1973 state statute defines six ways in which an insurance company can act in bad faith, which we unpack in a previous blog. It can be confusing to know what to do next if you think your insurance company is acting in bad faith. You were likely relying on them to help you in your claim, and being denied can feel frustrating and hopeless.

RELATED POST: Is Your Insurance Company Acting in Bad Faith? 5 Important Signs

What is Bad Faith Litigation?

Bad faith litigation occurs when you take legal action against your insurance company if they do not fulfill the contract they legally agreed to with you. Whether it’s your health, car, life, home or renter’s, business, disability, or long-term care insurance, your insurance company is acting in bad faith if they deny your claim unlawfully or take intentional actions to slow or disrupt your claim.

When you pursue a bad faith case, you can argue for several categories of damages. They include:

• Contract damages. Most obviously, the insurer is obligated to pay you whatever they promised you according to your original policy limits.
• Extra-contractual damages. Your extra-contractual claims will cover any losses you experience as a direct result of the bad faith denial or delay. They can include both economic and non-economic damages. For example: attorney fees, interest on loans you had to take out because insurance wouldn’t pay you, hotel or rental costs you had to incur as a result of not having a safe place to live, emotional distress and anguish, etc. In
• Punitive damages. Some states (although not Louisiana) allow for punitive damages in bad faith cases. Rather than compensate you directly for any specific losses, these are tacked on as punishment for the insurer’s egregious behavior, and to act as an example and deterrent for future insurance industry abuses.
• Penalties. Instead of punitive damages, Louisiana assesses “penalties” to the insurance company, which can reach up to two times the amount of the actual damages or $5,000, whichever is greater.

To recover the damages you deserve, you’ll want to file a legal claim against your insurer—but if your case is not sound, you’ll end up wasting a lot of time and money, and likely become even more frustrated.

Insurance companies have experienced legal teams to defend them against bad faith cases. To ensure your case is as strong as possible for the best outcome, we recommend working with an experienced bad faith attorney—especially one who has filed against your insurance company in the past.

Why Should You Hire a Bad Faith Attorney?

There are many reasons why hiring an experienced attorney is one of the best decisions you can make if you’re considering a bad faith claim. Here are just a few of the major ones.

Bad Faith is Hard to Prove

As outlined in the Louisiana statute, it is an insurance company’s “duty to adjust claims fairly and promptly and to make a reasonable effort to settle claims.” The terms “fairly,” “promptly,” and “reasonable” can all be interpreted subjectively, meaning it can be hard to prove that an insurance company is acting in bad faith.

Unfortunately, the situation is especially dire in Louisiana, which is ranked the second worst state for bad faith insurance litigation outcomes. Insurance companies do not want to lose these cases and often pull out all the stops to prevent a successful claim against them.

To prove wrongdoing and recover your damages, you need someone who knows what to look for in a bad faith case and understands the law well. Building a successful bad faith case requires compiling a lot of evidence, including things that an ordinary claimant might not know about or would have a difficult time obtaining. Having someone on your team who is experienced in bad faith litigation will greatly reduce the pressure on you.

Bad Faith Attorneys Lead to Better Financial Outcomes

Working with a bad faith attorney is also advantageous for you financially. In successful bad faith claims, the claimant is awarded up to 2x their original claim’s damages or $5,000 — whichever is greater. There’s a lot of money on the table, and an experienced bad faith lawyer gives you a better chance at getting it.

But beyond simply winning and losing, an attorney can help you financially in other ways. For example, they can rigorously review your initial damage claim and make sure you’re claiming the full value of your losses.

Furthermore, bad faith lawyers work on contingency, meaning they only get paid if they win your case. So they have a strong incentive to do their best on your behalf. And in Louisiana, in most cases (although not all, depending on which statue applies), insurance companies who act in bad faith are responsible to pay all the policyholder’s case expenses, including attorney fees. In other words, we would take our cut from them—not from you.

In short: You’ll want to do all you can to ensure your claim is valid and recover the money you legally deserve without expense to yourself.

Hiring an Attorney Means Better Peace of Mind

By hiring an experienced bad faith attorney, you have someone on your team who can handle all the details of the case and who knows how to fight for your rights throughout the process of filing a claim, navigating mediation, and taking the case to trial—should that be necessary.

It goes without saying that fighting this case alone, while you’re still dealing with the financial and emotional fallout resulting from the initial damage and breach of contract, is an enormous burden. We can handle your legal fight while you focus on taking care of yourself and your family.

When Should You Hire a Bad Faith Attorney?

If your valid claim has been denied by your insurance company, they have offered a settlement that is way too low, or they are taking unnecessary steps to make the process more difficult and time-consuming for you, you likely have a valid reason to file a claim against your insurance company. We explain the process of filing a bad faith lawsuit more in-depth in a previous blog.

Remember that bad faith can be extremely hard to prove, so we especially recommend getting the professional opinion of a bad faith attorney before filing to ensure you have a valid case against your insurance company.

In the state of Louisiana, you have 10 years to file a claim against your insurance company, but it’s best to get the process started as soon as you can for your own peace of mind and recovery. If you’re not sure where to start, give us a call for a free consultation to talk through your options.

RELATED POST: Can I Sue an Insurance Company for Bad Faith? – Insurance Claim HQ

Has Your Insurance Company Acted in Bad Faith in Louisiana? Get in Touch With Our Team

Insurance Claim HQ has an experienced team of Louisiana attorneys that specialize in bad faith litigation. We strongly believe that insurance companies should not be able to take advantage of customers who are depending on their insurance company for coverage for themselves and their families. We carry this passion with us as we fight for you every step of the way in a bad faith claim.

If you suspect your insurance company has acted in bad faith, reach out to us. We’d love to hear your story and help you determine your next best steps. For a free consultation, you can contact our team online or give us a call anytime, 24/7.

 

The content provided here is for informational purposes only and should not be construed as legal advice on any subject.