What Happens if an Insurance Company Acts in Bad Faith in Handling a Car Accident Claim?

Key Points:

• Whether you’re the insured or an injured third party, the insurance company has a legal duty to exercise good faith when handling your claim.
• When the insurance company acts in bad faith, they expose themselves to the risk of litigation.
• Bad faith often involves unreasonably delaying, withholding payment or a settlement offer, or denying coverage based on a valid claim.
• When an insurance company is found to be acting in bad faith, it may have to pay damages far beyond the policy limit.

When a driver purchases automobile coverage from an insurance company, that company promises to provide protection under the terms of the policy. In other words, when an accident happens, there is an expectation that the insurer will cover any claims brought against that driver. Usually this means payment for personal injuries, including medical expenses, lost pay, and pain and suffering. Motor vehicle accident claims also frequently include payments to repair damaged or totaled cars, trucks and motorcycles – this is known as property damage.

When an insurance company writing policies in the State of Georgia fails to fulfill its promises, such as by unreasonably delaying or withholding payment, or denying coverage of a valid claim, under certain circumstances, this may mean that the insurer or adjuster has acted in bad faith. In some cases, such as where claim is clearly worth more than policy limits or where coverage is clearly owed and is unreasonably denied, an insurance company can be penalized for acting in bad faith.

This guide explains common ways car insurance companies act in bad faith and how you can avoid being taken advantage of by the carrier when seeking compensation for your accident. Many of the cases our firm’s car accident lawyers handle involve ensuring that the insurance company does not act in bad faith, and fighting back when they do.

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Does Georgia Have Laws to Protect Me Against Insurance Companies Acting in Bad Faith?

Yes, Georgia laws help to ensure that insurance companies are held to their promise of supporting their policyholders. When they deviate from this duty by acting in bad faith, policyholders have the right to demand fairness and pursue legal actions if necessary.

Bad faith claims in liability cases may, in some cases, allow for a recovery greater than policy limits. When you make a claim against an at-fault driver’s liability policy, Georgia law requires the insurer to investigate and negotiate a settlement in good faith. This settlement must compensate you for all losses up to the policy limit.

What Are Some Examples of Insurance Companies Acting in Bad Faith?

Unnecessary Refusal or Delays in the Payment of Claims

When a carrier refuses to pay a valid claim promptly and the claim is clearly worth more than an at-fault driver’s policy limit, in some cases a lawsuit can be filed against the at-fault driver seeking to recover damages above and beyond their policy limit. For example, you may have suffered serious injuries in a car accident and may have been clearly entitled to recover the full policy limit of the at-fault driver. However, if the insurance company unreasonably refuses to pay the limits in a clear cut case, the carrier may be exposed to paying more than the limit in a subsequent lawsuit.

It is important to know that in such situations, the bad faith claim belongs to the insured (at-fault driver) rather than the claimant (victim). Bad faith claims may be voluntarily paid by the at-fault driver’s insurance company, or paid after a judgment is entered against the at-fault driver. It is often the case that an insured may assign the bad faith claim to a victim/plaintiff in exchange for an agreement not to pursue a judgment against the insured for any deficiency.

Refusing to Defend a Lawsuit

Insurance companies usually have a duty to defend an at-fault driver against liability claims. When an insurance company refuses to defend or cover a claim without a valid reason, it may have breached its duty of good faith and fair dealing. This can expose the insurance company to being held responsible to pay a judgment or verdict in the case, and potentially other bad-faith related penalties.

The mere failure to pay or acknowledge a claim doesn’t constitute a refusal to provide a defense, however. An insurance company may deny a claim for any number of reasons. For example, if the at-fault driver was specifically excluded from a policy, the insurer may argue it has no duty to defend a liability claim. Other reasons include expired policies, or intentional actions such as road-rage incidents.

If you believe an insurer acted in bad faith in refusing to provide a defense, it is important to obtain and review the at-fault driver or their company’s entire insurance policy to review the terms and conditions of the policy. If you are not comfortable doing so yourself or if the insurance company refuses to produce the policy, a personal injury attorney can get the policy and take action on your behalf.

Unreasonable or Outlandish Interpretation of the Insurance Policy

Another bad faith tactic that carriers sometimes employ is making unreasonable or outlandish interpretations of an insurance policy. Even though insurance companies have a duty of good faith and fair dealing, they may deliberately misrepresent policy language or interpret policy language against in an effort to avoid providing coverage.

What is the Potential Impact on Me if an Auto Insurance Company Acts in Bad Faith?

If an auto insurance company acts in bad faith after a car accident, whether it’s your insurance company or the insurer of the other driver, there can be several consequences for you if you file an insurance claim:

• Delayed compensation of money you need for medical bills, or other expenses related to the accident.
• Financial strain if you are unable to work due to injuries.
• Legal costs from hiring an attorney.
• Stress and frustration from dealing with an uncooperative insurance company.
• Credit issues if you’re unable to pay bills due to the insurance company’s failure to pay a legitimate claim.
• Compromised recovery if you don’t receive necessary medical treatment in a timely manner.
• Settlement pressure to accept a lower settlement than what you are entitled to.
• Extended legal proceedings can be time-consuming and emotionally draining.
• Risk of under-compensation occurs when you might not be aware of the full extent of compensation you’re entitled to.

What are the Differences in the Legal Process Between a Bad Faith Car Accident Claim and a Standard Car Accident Claim?

The procedures, timelines for reaching settlements, and types of required evidence vary between these two types of claims.

Normal Car Accident Injury Claim:

• Filing the claim with the insurance company
• Evaluation of the medical reports and evidence of damages
• Settlement negotiation, which can be handled by your lawyer
• Resolution when a settlement is agreed upon and accepted, but it can go to trial if an agreement can’t be reached
• Focus on proving the extent of your injuries and damages to receive just compensation

Bad Faith Insurance Claim:

• Grounds for a claim if the insurance company improperly handles your claim by delaying, undervaluing, or denying payment without reason
• Evidence that the insurance company’s handling of your claim was unreasonable and without a proper cause
• Higher burden of proof, which means your lawyer must show that the insurer’s conduct was not just incorrect, but unreasonable or without justification
• Potential damages for things such as emotional distress, legal fees, and sometimes punitive damages, over and above the original accident-related costs
• Longer process due to the complexity of a bad-faith claim
• Focus on the insurance company’s failure to act appropriately, with your car accident lawyer challenging their actions and fulfilling their legal and contractual duties

How is the Amount of Compensation Determined in a Bad Faith Claim?

The compensation in a bad faith claim against an auto insurance company is often determined by looking at the full amount of damages you experienced. This can include the amount the insurance company should have originally paid you on the claim, plus any additional financial losses you have proven, when those damages exceed the policy limits.

What Evidence Do Car Accident Lawyers Need to Prove Bad Faith?

Your personal injury attorney would look at the insurance policy and policy limits (often known as policy declarations), how the claim was handled by the insurance company and their adjuster, and the history of correspondence between the injured victim or their attorney and the insurance company.

A comprehensive set of documents and evidence may collectively show the insurance company did not act in good faith in handling your insurance claim.

Can the State of Georgia Get Involved When an Auto Insurance Company is Acting in Bad Faith?

The State of Georgia can get involved when an auto insurance company may have acted in bad faith. The Georgia Department of Insurance (DOI) has the authority to investigate complaints against insurance companies. If you believe your insurer is not handling your claim fairly, you can file a complaint with the department. DOI will then look into the matter and determine if the insurance company has violated any state insurance laws or regulations. If the insurer is found to have acted in bad faith, the state can impose penalties.