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November 17th, 2023
No one purchases insurance coverage thinking that the insurance company will refuse to provide the benefits it has agreed to pay. Unfortunately, sometimes, an insurer fails to live up to the promises it makes in an insurance policy, and policyholders have to fight for the coverage to which they are entitled. When an insurance company behaves unreasonably in handling an insurance claim, whether by not making a prompt decision, by not appropriately communicating the reasons for its decisions, or by incorrectly denying or limiting benefits, the policyholder may have to take legal action to protect himself or herself from the insurer’s bad faith conduct.
An insurance policy is a contract, and like any contract, the policy’s terms largely spell out the rights and responsibilities of the parties to it. While the entire policy matters, there are certain common policy provisions that may become particularly important in a bad-faith lawsuit.
An insurance policy contains an “insuring agreement,” which is the basic agreement that the insurance company makes to be responsible for certain costs in exchange for the policyholder’s payment of premiums. For instance, an auto policy may contain an agreement to protect the insured against legal liability for bodily injury and property damage caused by an accident. Basically, this agreement means that if the policyholder is involved in an auto accident and causes damage for which he or she is legally responsible, the insurer agrees to pay that amount.
While this may sound simple, insurance policies also define specific terms and may limit what is considered an “injury” or “accident” and even who is considered insured under the policy. It is important to know these definitions in order to understand just what coverage the insurance company has agreed to provide.
Insurance policies also identify limits of coverage, which are the maximum amounts of benefits that the insurer will pay. While these limits are important for understanding the amount of protection a policy provides, they can also be significant for other, more complicated reasons. An example of this is insurance that pays for an insured’s legal liability. If an insured is liable for damages caused in an accident, an insurer has a responsibility to protect the insured from damages over the coverage limit by making a reasonable attempt to resolve any claim against the insured for an amount within that limit. Understanding the limits of coverage allows the policyholder to ask the right questions of the insurance company and to recognize if the insurer is not keeping the agreement made in the policy.
Additionally, an insurance policy can contain specific conditions that must be met, such as providing notice of a claim to the insurer and cooperating in the claims process. Policies also contain provisions that exclude some types of events from coverage. These exclusions can be difficult to understand, and insurance companies do not always apply them the same in every situation. However, having a basic understanding of the terms of your insurance policy can help you recognize if the insurance company is not meeting its responsibilities. If you have questions about how your insurance claim is being handled, you don’t need to look for answers alone. A lawyer experienced in dealing with insurance companies can help determine what steps are necessary and make sure you receive the protection you deserve.
