Caufield & James, L.L.P Caufield & James, L.L.P

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How your insurance company works against you

When you sign up for a business insurance policy, the insurance company is all smiles and assurances, telling you how they take great care of their clients and how you can trust them. They promise to be there for you when you need them most. It gives you peace of mind, knowing that your company is less likely to run into an unexpected situation that proves financially devastating.

When that situation arises, though, the insurance company changes drastically. They deny your claims. They refuse to investigate. They refuse to pay. They leave you on the hook for those costs, as though you never bought a policy in the first place.

It's frustrating on many levels. Not only do you not get the coverage you need, but you feel cheated. This situation is the exact reason you have spent years paying for that insurance. Where did all your money go, if not toward this claim? You feel like they lied to you. All of those assurances ring hollow.

Bad faith

While companies do sometimes have legitimate reasons to deny claims, treating you unfairly in an effort not to pay is known as bad faith insurance. The company has a contractual obligation to you and your company. They try to renege on that obligation and keep you from the money you deserve and need. A few ways this could happen include:

  • Simply refusing to pay even though it is clear that your claim has merit.
  • Refusing to investigate your incident at all to determine what they owe you.
  • Denying payments on grounds not listed in the actual contract.
  • Refusing to move forward with the process in a prompt manner; they may promise to investigate and sort it out, for instance, but then never actually do so, simply stringing you along.
  • Paying you an amount that is clearly far lower than what you should receive.
  • Ignoring your communications entirely and refusing to contact you.
  • Avoiding the payout by misrepresenting the language in the contract.
  • Hiding limitations on the policy or refusing to disclose them to you so that you buy a plan that does not actually give you the coverage you need.
  • Demanding that you prove the loss to an unreasonable degree. Asking for some proof is normal -- a picture of the damage, for instance -- but taking things too far in an effort to get you to give up so that they do not have to pay is acting in bad faith.

That's how your insurance company may actively work against you. If this happens, you need to know that it is more than unfair. It is illegal, and you do have options.

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