What is a bad faith insurance claim?

On Behalf of | Apr 12, 2020 | No Fault Insurance |

Auto collisions happen every day in Michigan. Motorists often file claims with their insurance companies in the hope of recovering money to fix their car, to cover their medical bills and/or for lost wages. The onus to decide who gets paid falls on the insurance company’s shoulders. Judges often side with insurers when they’re tasked with deciding how much a claimant should receive following an accident.

There are instances, though, in which insurance companies fail to act reasonably. They sometimes deny a valid claim. You, as the insured, are generally entitled to file a lawsuit against the insurance company in these instances. You must be able to prove that your insurance company engaged in some type of bad faith practice that violates Michigan state statutes if you plan to successfully sue them.

Several elements comprise a bad faith claim. The steps that the insurance company took generally need to have been unreasonable or done without proper cause.

In some jurisdictions, a claim may only be considered a bad faith one if an insurance company denied liability when it wasn’t all that debatable in the first place. Bad faith claim denials are viewed much like breaches of contracts in some jurisdictions.

One thing that most jurisdictions do agree about is that anytime an insurance company has failed to demonstrate a duty of good faith and fair dealing, then they’ve likely acted in bad faith.

An insured person must be able to demonstrate that their insurance company used both unfair and deceptive tactics if they’re planning to file a bad faith claim. An example of a potentially unfair action may be if an insurance company asks their insured to file a court case for restitution. Another might be if an insurer doesn’t provide a prompt reason for the denial of the claim.

If an insurer fails to provide a fair settlement despite there being a clear proof of liability or they deny a claim without investigating it, then they may also have employed bad faith insurance tactics.

It’s not uncommon for Michigan residents to have your auto accident claim denied and to receive no justification for why it happened. A attorney can follow up with your insurer to see why your claim was denied and, if necessary, help you file a lawsuit.

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