Insurance companies have an absolute duty to act in good faith when interpreting policy language, investigating a claim, and/or paying benefits under the policy.

An insurance company is prohibited from putting its financial interest above that of an insured, engaging in tactics designed to create unreasonable delay or underpaying valid claims.  When the insurance company uses trickery, deception, or misrepresentation during the claims process, the insurance company can be liable for extra-contractual damages for insurance bad faith.

The insurer must establish the applicability of an exclusion or limitation when it asserts that a claim is not covered.

Insurance policies usually include an “insuring clause” comprised of a few words along with dozens of paragraphs devoted to enumerating exceptions, exclusions, and limitations to coverage.  Insurance companies often will send a letter denying the claim and citing an exclusion or other relevant language in the policy to justify its coverage decision.  Many insureds never get their legitimate claim paid because they simply accept the contention made by the insurance company that a particular exclusion applies to the claim.  However, the insurer bears the burden of proving that an exception, exclusion, or limitation applies and that it is both clear and conspicuous.

An insured may be entitled to more than the value of his claim if the insurance company violates its duty of good faith and fair dealing.

The ability of an insured to seek damages above and beyond the value of an insurance claim provides an incentive for insurance companies to handle a claim in good faith.  If insurance companies did not face any risk of paying more than the full value of the claim, they could adopt a policy of denying every claim and making the process of obtaining compensation as drawn out and difficult as possible.  Even if the insured took the insurer to court for breach of contract, the insurance company would have its liability constrained by the available contract damages.  Because an insurance company may be hit with both an insured’s attorney fees and litigation costs and other damages, the insurance company faces financial risk if its approach to every claim is to deny coverage on frivolous grounds.

An insurance company may be engaging in an unlawful practice if it attempts to rescind (cancel) your policy for misrepresentation after you have submitted a claim.

When you complete an insurance application, you need to be very careful about completing the application accurately.  Insurance companies frequently deny claims or rescind coverage based on non-disclosure or misrepresentations in an application.  The reason for allowing an insurance company to deny coverage or cancel a policy on this basis is that the information may have had a material impact on the decision to provide coverage or on the amount of the premium. 

On the other hand, an insurance company cannot forgo investigating the information on an application while collecting payments indefinitely only to rescind the policy as soon as a claim is made.  Under a life insurance policy, for example, an insurance company in Florida typically must raise a misrepresentation issue within the two year contestability period to rescind coverage.  Florida also recently enacted regulations that limit the time for homeowners’ insurance companies to rescind coverage based on misrepresentation of credit information that is public information.  The insurer must raise these issues within 90 days from the time of issuance of the policy.  See Florida Statutes Section 627.409(3).

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].


J.P. Gonzalez-Sirgo
J.P. Gonzalez-Sirgo, P.A.
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