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INSURANCE COMPANY BAD FAITH: WHAT HAPPENS WHEN THE “GOOD HANDS” PEOPLE HAVE THE UPPER HAND
Most people in our society today spend a significant amount of their disposable income on insurance coverage. We are required by law to purchase insurance on our automobiles. Anyone who has a mortgage must have homeowners insurance. Even if you own your home, homeowners insurance is almost always purchased to protect you against fire, theft and other casualties. Individual consumers and their employers pay large amounts for health insurance coverage every month.
What happens, however, when it is time for the insurance company to pay out on a claim? In the vast majority of cases, claims are handled efficiently and a settlement is made to, at least, the partial satisfaction of the policyholder. In some cases, however, the insurance company denies what is otherwise a valid claim or fails to handle or pay a claim on a timely basis. Because we trust insurance companies with such major aspects of our lives, homes, automobiles and health, we have the right to expect fair treatment. When consumers are treated unfairly, the courts have fashioned a remedy which not only pays the amount originally due, but allows the consumer to recover “punitive” damages to punish the insurance company for its unfair conduct. These cases are known as “bad faith” claims and can result in large verdicts against insurance companies which do not treat their policyholders as they should.
An insurance company can use several tactics to gain the upper hand with its policy-holders. Primarily, insurance companies will delay payment of benefits and repeatedly ask for the same or similar documentation. The delay serves to place the policyholder in a disadvantaged position, particularly when one is dealing with the loss of a home or a major life catastrophe, such as a disability which prevents one from seeking gainful employment. In cases such as this, courts have ruled that insurance companies can be made to pay not only the original amount of the claim, but additional damages due to their “bad faith” or “unfair and deceptive trade practices”.
In a similar vein, the Federal Court in the Western District of North Carolina has recently ruled that a mortgage company which collects and pays a homeowner’s insurance and real estate taxes can be held liable for punitive damages when it fails to make timely payments of those amounts, thereby causing the homeowner to be placed in a disadvantaged position. The Court ruled that there is a “fiduciary duty” on the part of the mortgage company to make payments for expenses that it collects. A fiduciary duty places a special burden on the mortgage company to be sure that it does what it is supposed to do and treats the homeowner fairly.
If you believe that you have been victimized by the wrongful or bad faith conduct of either an insurance company or a mortgage company, you should contact a lawyer to advise you on protecting your rights. An attorney can help you deal with these difficult and sometimes life-changing situations, and can help you keep the “good hands” people from unfairly gaining the upper hand.
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