As a Miami property damage insurance attorney, I have assisted hundreds of people involved in insurance claims disputes both as an insurance adjuster and an attorney representing policyholders. Insurance bad faith claims provide a valuable remedy for an insured whose insurance company fails to properly adjust and pay his or her claim. This blog provides an overview of some important information that an insured should know about insurance bad faith claims.
A distinction that policyholders should be aware of is the difference between first party and third party bad faith claims. A first party claim involves the insurance company of the named policyholder. When policyholders file claims with their own insurance company, the insurer has a responsibility to settle the claim within a reasonable time period for the reasonable value of the claim.
By contrast, a third party insurance claim involves a claim against someone else’s insurance coverage. When you are involved in an auto accident where the other party is at-fault, the insurance company for that party is obligated to pay your claim as a third party claim. A third party insurance claim involves a liability carrier’s duty to defend against a lawsuit or claim. Third party insurance coverage also involves the duty to indemnity policyholders, which means a legal obligation to pay a judgment or settlement against the policyholder. If the conduct or incident is covered by the policy, the insurer of the at-fault party is obligated to cover the cost of any damage award up to policy limits.
Despite the prominent role of insurance, there is no federal insurance bad faith law that would dictate what constitutes an insurance company’s duty of good faith and fair dealing toward its insured. The insurance industry wields so much financial influence that it has enormous ability to lobby Congress to prevent federal legislation that would protect policyholders from bad faith conduct.
The void in terms of federal legislation of insurance bad faith means that such claims are governed by state law. While every state has insurance bad faith laws, these laws differ from state to state. However, there are certain general principles that apply which include the general principle that bad faith refers to denying, underpaying or delaying policy benefits when a legitimate claim is filed under a valid policy. Generally, most states hold insurance companies to a fiduciary relationship with policyholders. This special trust relationship means that insurance companies have a legal duty to give the interests of policyholders as much consideration as they gives their own interest.
Under Florida law, insurance companies owe a fiduciary relationship toward policyholders. This special relationship generally means that insurance companies are obligated to search a policy for a basis to cover a claim rather than scour the policy to find a justification for denying coverage. Insurance companies also have a legal obligation to make a timely determination regarding whether it will pay or deny a claim and to communicate this decision to the policyholder. Carriers also have a good faith duty to do the following:
- Respond promptly to policyholder questions and needs
- Provide a specific reason for denying a claim including a reference to the specific policy provision
- Conduct an adequate investigation of the claim
These are only a few examples of duties of Florida insurance companies to their policyholders. If you believe your insurance company is treating you unfairly, we invite you to contact us to discuss your issue. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.