How to File a Bad Faith Claim Against an Insurance Company

how to file a bad faith claim against an insurance company

You can file a bad faith claim against insurers by taking the right steps, including reviewing your contract, gathering relevant documentation, and other courses of action. Knowing how to file a bad faith claim against an insurance company may help hold them accountable when they deny a claim without a justifiable reason.

What Is Insurance Bad Faith?

If you’re considering filing a bad faith claim, it’s important to understand what insurance bad faith is and how it works. An insurance company operates in bad faith when it denies a valid claim or declines to protect policyholders for unjust reasons. 

Insurance companies can act in bad faith in various ways, which can lead to serious consequences for policyholders who need coverage. This is why you should know what types of bad faith conduct to look for based on the nature of a claim denial.

Types of Bad Faith Insurance Claims in Illinois

If an insurance company engages in bad faith practices in Illinois, you may file one of two main types of bad faith insurance claims. These include:

First-Party Claims

If you are the policyholder under an insurance company and eligible to receive coverage under contract, you can file a first-party claim against the company if you believe it operated in bad faith. For instance, you may file a first-party claim against your auto insurance company if you are involved in an auto accident resulting in damage and the insurer unjustly denies your claim. Often, first-party claims involve life, business, homeowners, and disability insurance.

Third-Party Claims

If another party’s insurance company practices bad faith conduct, you may be able to file a claim against it even if you aren’t a policyholder. For example, if you sustain a work injury and are eligible to recover workers’ compensation, you may be able to file a bad faith claim against your employer’s workers’ comp insurer if the company unreasonably denied your right to seek an examination from a qualified specialist.

Third-party claims can involve many situations, such as auto accidents, premises injuries, and transportation accidents, among others.

Ultimately, there are many types of bad faith conduct that may lead to a bad faith claim in Illinois. Some specific types of conduct include:

  • Denial of benefits without a valid reason
  • Neglecting to conduct an investigation into a claim
  • Delaying investigations or the approval or denial of claims
  • Seeking an unreasonably lower settlement than what the claim is truly worth
  • Requiring individuals to go through medical testing they don’t need
  • Misrepresentation of the facts of a case or an investigation into a claim

If you believe that your insurance company acted in bad faith, you may have enough evidence to support a claim or lawsuit.

How to File a Bad Faith Insurance Claim

If you want to file a bad faith claim against an insurance company, there are several steps you will need to take. Keep in mind that these cases are often difficult to prove and require ample evidence showing that the insurance company acted in bad faith.

You must prove that the insurer owed a duty to investigate, indemnify, defend, or settle reasonably and that the insurer breached this duty. Depending on the jurisdiction, bad faith may be considered a tort, in which case the insurer causes harm to policyholders or other parties through bad faith.

Here are the specific steps you will need to follow if you want to successfully file a bad faith insurance claim:

Look Closely at Your Contract With Your Insurer

If you’re filing a first-party bad faith insurance claim, you will need to carefully review your contract with your insurance company. This is why it’s important to obtain a copy of your policy as soon as possible if you believe your insurance company acted in bad faith. Understanding the specific terms of the contract and policy will help you determine whether bad faith conduct occurred. You may then confidently move forward when filing a claim, with the policy potentially serving as a form of evidence supporting your claim.

Collect Sufficient Evidence to Support Your Claim

Bad faith insurance claims are often challenging to prove in these cases, which is why you need as much evidence as possible to show how the insurance company acted unreasonably or unjustly. Insurance companies fight hard to defend their decisions and their reputation, so you need to collect plenty of documentation. 

Evidence supporting bad faith insurance claims may include your insurance policy, correspondence with insurance adjusters, claim denials and any reasons for denial, medical records, and phone calls.

Request a Review of the Denial

If the insurance company chooses to deny your claim, and you believe it qualifies for approval, you may request a review from the insurance company. If the insurance company still opts to deny the claim, you may have the chance to take the case to a higher authority. At some point, the insurance company may reverse its decision. It’s possible that the insurance company simply made a mistake, at which point a review could lead the insurer to discover its error.

When appealing a denial, you must submit the appeal in writing, which will officially record the request and may provide documentation to support your case in a lawsuit. In a final demand, establish that you will file a lawsuit if the insurance company either fails to provide a valid reason for the denial or reverses the denial. 

Remember, if you fail to issue a final demand before filing a lawsuit, you may be unable to file a successful claim entirely as the insurance company wouldn’t have enough time to meet your demands.

File a Complaint With the Illinois Department of Insurance

If you are dissatisfied with your insurance company’s response or believe it has failed to comply with your demands, you may be able to file a complaint with the Illinois Department of Insurance (IDOI). This department would then review the case and determine whether you have a valid claim.

Even if you choose to file a complaint with the IDOI or another state’s insurance department, you still have the option of continuing with a lawsuit at the same time.

Types of Damages Recovered in Bad Faith Lawsuits

In an insurance bad faith lawsuit, you may recover various types of damages, including:

  • Damages that go beyond the limits of your policy
  • Interest
  • Certain types of statutory penalties
  • Financial losses
  • Pain and suffering
  • Punitive damages, intended to punish insurers in extreme cases

An attorney may help you calculate all the damages involved in your case to determine how much you can recover in a settlement. 

Retain an Attorney for Bad Faith Insurance Claims

Before filing a claim or lawsuit accusing an insurance company of bad faith conduct, you should speak with an insurance fraud lawyer. An experienced attorney will know how these cases work and may be able to help you build a strong claim or lawsuit.

Insurance companies have ample resources to contest bad faith insurance claims, making it difficult for most people to go up against them alone. Having a reliable attorney may help increase your chances of successfully proving that the insurance company acted in bad faith.

When discussing your case in a consultation, an attorney can help determine whether you have a strong case, gauge the likelihood of success based on the details of your case, and calculate a fair settlement if you have a valid claim. 

Insurance fraud attorneys can also negotiate with insurance companies to prevent potentially compromising statements or communication from hurting your case.

If you’re worried about the cost of hiring a bad faith insurance lawyer, many of these attorneys work on a contingency basis. This means that the attorney won’t receive payment until they settle your case. The contingency fee will charge a portion of the settlement to cover legal fees. At the same time, you won’t need to worry about being able to pay the bills while waiting for coverage to come your way.

Take the Right Steps to Build a Bad Faith Insurance Claim

When insurance companies act in bad faith, this puts people at risk of serious harm in many cases. For example, injury victims won’t be able to receive the treatment they need to make a full recovery, and people can suffer severe losses that coverage would normally prevent. If you believe that your insurance company or another engaged in bad faith conduct when filing a claim, you may be able to build a case against insurers.

By reviewing your contract, collecting enough evidence, submitting a demand letter, and ultimately contacting a dependable bad faith insurance attorney, you may be able to succeed with a bad faith claim or lawsuit.

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