What Happens If an Insurance Company Acts in Bad Faith?

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.
• If, after investigating your claim, the insurance company finds reasonably clear evidence of liability but offers less than your claim is worth, a court may find it has breached its duty and acted in bad faith.
• Examples of insurance company bad faith include unnecessary delays in handling claims; inadequate investigation; refusal to defend a lawsuit; refusal to make a reasonable and timely settlement offer; and outlandish interpretations of an insurance policy.
• In Georgia, when an insurance carrier acts in bad faith, it may have to pay you damages far beyond the applicable policy limit as well as statutory penalties and attorney’s fees.

Traditionally, insurance companies hold a distinct status under the law due to the essence of their business—offering the promise of financial protection. When you buy coverage from an insurer, the company commits to covering your damages according to the policy terms in the event of an accident. Should you be liable for injuries sustained by others, your insurance policy is designed to shield you from the financial burden of those expenses, preventing the need to pay them from your own funds.

You Choose and Pay Your Auto Insurance Company – Because You Trust Them

Imagine consistently paying for your auto insurance over many years, only to find that when you need it most—after a car accident—your insurance company fails to fulfill its promises. This essentially defines acting in bad faith is. The trust is betrayed. You fulfilled your obligation by paying for your coverage each month, but they failed to fulfill their promise when it was needed.

Georgia Laws Actually Protect You from Insurance Companies Acting in Bad Faith

In Georgia, there are specific laws aimed at protecting policyholders from auto insurance companies that are acting in bad faith. This means that if an insurance company doesn’t deal with a car accident claim in a fair and timely manner, or it refuses to pay what it owes, the policyholder can use these laws to hold the company responsible.

The law, Georgia Code § 33-4-7, requires that insurance companies must act in good faith, handling claims swiftly and justly. If a company is found acting in bad faith, the policyholder can alert the state’s insurance commissioner or a consumer insurance advocate.

Another statute, Georgia Code § 33-4-6, states that an insurance company’s failure to pay a claim within 60 days allows the policyholder to sue for bad faith. The law also insists that a court needs more proof than just an expert’s opinion to rule whether an insurance company was acting in bad faith.

Moreover, Georgia Code § 13-6-11 allows policyholders to recover their attorney’s fees and litigation expenses if they sue their insurance company for acting in bad faith by not paying a legitimate claim.

These laws 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.

The Impact of Auto Insurance Bad Faith on Car Accident Victims

If an auto insurance company acts in bad faith after a car accident, whether it’s the insurance company of the person involved or the at-fault driver, there can be several consequences for the person who has the insurance claim:

• Delayed Compensation: The individual may face significant delays in receiving the money needed for repairs, medical bills, or other expenses related to the accident.
• Financial Strain: The delay or denial of a fair settlement can lead to financial stress, especially if the person is unable to work due to injuries or if they have to pay for vehicle repairs out of pocket.
• Legal Costs: Pursuing a bad faith claim against an insurance company usually requires hiring an attorney, which can incur additional costs.
• Stress and Frustration: Dealing with an uncooperative insurance company can be a source of considerable emotional distress and frustration.
• Credit Issues: If the person cannot pay their bills due to the insurance company’s failure to pay a legitimate claim, their credit score could suffer.
• Loss of Use: If the insurance doesn’t cover the cost of a rental car or replacement transportation, the person may be without a vehicle for an extended period.
• Compromised Recovery: In cases involving injuries, if the insurance company does not pay for necessary medical treatment in a timely manner, it could affect the individual’s recovery.
• Settlement Pressure: People may feel pressured to accept a lower settlement than what they are entitled to, just to get some compensation quickly.
• Extended Legal Proceedings: Sometimes, to resolve a bad faith issue, the person might have to engage in prolonged legal battles, which can be time-consuming and emotionally draining.
• Risk of Under-Compensation: Without the guidance of a knowledgeable attorney, a person might not be aware of the full extent of compensation they’re entitled to, resulting in accepting an inadequate settlement.

Examples of Bad Faith After a Car Accident

Denying a Claim Without a Valid Reason:

An auto insurance company may act in bad faith by rejecting a claim without providing a legitimate explanation. This leaves policyholders in a tough position, as they have been paying premiums with the expectation of coverage, only to be left without support when they file a legitimate claim.

Example: Let’s say a driver submits a claim to the at-fault driver’s insurance company after being involved in a collision. Despite clear evidence that their insured client caused the accident, the insurance company denies the claim. They assert that their policyholder was not responsible, without presenting any substantive evidence to support this claim. This unfounded denial of liability, in contradiction to the evidence, exemplifies the insurance company acting in bad faith.

Unreasonable Delays in Claim Processing:

Insurance providers commit bad faith when they deliberately delay the processing of a claim. This tactic can pressure the insured into accepting a lower settlement due to financial strain from not having their vehicle repaired or medical bills covered in a timely manner.

Example: Suppose your insurance policy specifies that claims are to be processed within 30 days. You’ve submitted all necessary documents and evidence, yet the insurance company continues to request more information, which appears unnecessary, and doesn’t respond to your questions or decide about your claim. As months pass, despite your attempts to cooperate and maintain open lines of communication, the company offers no legitimate explanation for the holdup. Such a prolonged delay can cause financial hardship, particularly if you need your car fixed to commute to work or carry out daily tasks.

Such an unreasonable delay in processing your claim, especially without proper justification, could be considered acting in bad faith because the insurance company is not upholding the terms of the insurance contract and is impeding your ability to recover from the accident.

Underpaying a Claim:

Offering significantly less money than a claim is worth is a common bad faith practice. The insurance company might ignore evidence or use questionable methods to undervalue the cost of repairs or medical expenses, essentially forcing the policyholder to bear costs that should be covered by their policy.

Example: Imagine you sustain injuries in a car accident, and after a thorough medical evaluation, the total cost of your medical treatment, including necessary future therapies, is estimated at $50,000. You file a claim with your auto insurance company, providing detailed medical reports and expense forecasts. Despite this, the insurance company offers you only $25,000, asserting that this amount sufficiently covers your medical expenses.

They might do so without adequately accounting for all aspects of your treatment plan or disregarding the medical professionals’ recommendations. This refusal to pay the full amount, especially without a valid explanation or disregard for the documented medical advice, could be viewed as the insurance company acting in bad faith by underpaying the claim. They are essentially not honoring the policy’s coverage for your legitimate injury-related expenses.

Failing to Conduct a Proper Investigation:

An insurer must thoroughly investigate a claim before making a decision. Acting in bad faith, an insurance company may fail to investigate or ignore findings that would warrant payment, effectively denying the policyholder the benefits they are entitled to.

Example: Suppose you’re in a car accident that wasn’t your fault, and you file a claim with the other driver’s insurance company for the damage to your vehicle. A proper investigation would typically involve the insurance company promptly sending an adjuster to assess the damage, reviewing the accident report, talking to any witnesses, and checking any available traffic camera footage.

However, in this case, the insurance company makes a decision without sending an adjuster to evaluate your car’s damage or looking into the accident report details. They deny your claim based on a cursory review or an incorrect assumption about the accident circumstances without thoroughly investigating the evidence you’ve provided. This lack of a thorough investigation process can lead to an unjust claim denial, which constitutes bad faith on the part of the insurance company. They are expected to diligently review all aspects of the claim before making a fair determination.

Changing Policy Terms After a Claim is Filed:

If an auto insurance company retroactively alters the terms of a policyholder’s coverage after a claim has been submitted, this constitutes a serious bad faith action. It can leave the insured without the coverage they initially purchased and believed they had at the time of the accident.

Example: Assume you have an auto insurance policy that includes comprehensive injury coverage. You’re involved in an accident and sustain injuries that, according to your policy, should be fully covered. You submit a claim for the medical treatment required due to the accident.

However, after filing your claim, the insurance company informs you that your policy has been updated and now includes a lower cap on medical expense coverage, which wasn’t in place at the time of your accident. They insist that this new cap applies to your claim, effectively reducing the amount they will pay for your medical bills, even though you were never notified of any changes to your policy, nor did you consent to any such modifications. This post-claim alteration of policy terms to minimize payout can constitute bad faith, as insurance companies are obligated to abide by the policy terms that were active when the incident occurred.

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

Yes, the State of Georgia can get involved when an auto insurance company is accused of acting in bad faith. The Georgia Department of Insurance has the authority to investigate complaints against insurance companies. If a policyholder believes their insurer is not handling their claim fairly, they can file a complaint with the department. The insurance commissioner’s office 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, including fines and other sanctions.

Are All Bad Faith Claims to Be Reported to the Georgia Department of Insurance?

Not all bad faith claims need to be reported to the Georgia Department of Insurance. Reporting to the Department is typically a step taken by policyholders who seek assistance with their complaint or when they believe the insurer’s conduct warrants regulatory scrutiny. While policyholders have the option to report instances of bad faith, they are not legally obligated to do so. Many choose to resolve their disputes through negotiation with the insurance company, mediation, or litigation. However, if there is a pattern of bad faith practices or a significant issue with the insurance company, reporting such behavior can be important for broader accountability and could assist in preventing similar issues for others.

If the Georgia Department of Insurance decides that your car insurance company was Acting in Bad Faith, Can You Use that to Make Your Legal Case Against Them Stronger?

Yes, if the Georgia Department of Insurance determines that an auto insurance company acted in bad faith, this finding can indeed be used to strengthen your legal case against the company. Such a determination can serve as substantial evidence supporting your claim that the insurer failed to honor their obligations under the insurance policy. It can also influence the negotiations for a settlement or be presented in court to show that the insurer’s actions have been officially recognized as inappropriate by a regulatory authority.

Are Car Accident Lawyers Suppose to Inform the State of Georgia if an Auto Insurance Company is Acting in Bad Faith?

Car accident lawyers are not required by law to report an insurance company for acting in bad faith to the State of Georgia. However, they may choose to inform the state’s insurance commissioner if they believe an insurance company is consistently engaging in bad faith practices, as part of their responsibility to protect their client’s interests and to uphold the integrity of the legal and insurance system. Additionally, informing the insurance commissioner can be part of a strategy to apply pressure on the insurance company to resolve a dispute. It’s worth noting that consumers themselves, or their lawyers on their behalf, can file a complaint directly with the Georgia Department of Insurance if they believe an insurer is acting in bad faith.

Can an Auto Insurance Company Be Penalized by the State if Caught Acting in Bad Faith?

Yes, an auto insurance company can be penalized by the state if it is caught acting in bad faith. State insurance regulators have the authority to impose various sanctions on insurance companies that violate regulations or fail to adhere to the standards of fair practice. These penalties can include fines, restrictions on their license to operate within the state, and in severe cases, revocation of their license. Additionally, the state’s insurance department may require the company to compensate affected policyholders. The specific penalties would depend on the state’s insurance laws and the severity of the bad faith actions.

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

Car accident claims and bad faith insurance claims against an auto insurance company differ significantly. The procedures, timelines for reaching settlements, and types of required evidence vary between them. Interestingly, a car accident victim may contend with both types of claims simultaneously. Let’s delve into the distinct processes involved in each.

Normal Car Accident Injury Claim:

1. Filing the Claim: After an accident, you or your car accident lawyer file a claim with the insurance company, detailing the damages and injuries sustained.
2. Evaluation: The insurance company investigates the accident, and your car accident lawyer may submit medical reports and evidence of damages to argue for a fair evaluation.
3. Settlement Negotiation: Your car accident lawyer negotiates with the insurance company to reach a settlement amount for damages and injuries.
4. Resolution: The claim is usually resolved through a settlement negotiated by your car accident lawyer, but it can go to trial if an agreement can’t be reached.
5. Focus: The focus for you and your car accident lawyer is on proving the extent of your injuries and damages to receive just compensation.

Bad Faith Insurance Claim:

1. Grounds for Claim: A bad faith claim may be pursued by your car accident lawyer if the insurance company improperly handles your claim by delaying, undervaluing, or denying payment without reason.
2. Legal Action: Your car accident lawyer must initiate a lawsuit alleging bad faith against the insurance company, separate from the original accident claim.
3. Evidence of Bad Faith: You and your car accident lawyer need to provide evidence that the insurance company’s handling of your claim was unreasonable and without a proper cause.
4. Higher Burden of Proof: Your car accident lawyer faces a higher burden of proof, showing that the insurer’s conduct was not just incorrect, but unreasonable or without justification.
5. Potential Damages: Your car accident lawyer can seek additional damages in a bad faith claim, such as emotional distress, legal fees, and sometimes punitive damages, over and above the original accident-related costs.
6. Longer Process: With the help of your car accident lawyer, you should be prepared for a potentially longer legal process due to the complexity of a bad faith claim.
7. Regulatory Complaint: Your car accident lawyer might also file a complaint with the state’s insurance department, which is part of the bad faith claim process.
8. Focus: The focus in a bad faith claim is 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 against an Auto Insurance Company?

The compensation in a bad faith claim against an auto insurance company is determined by looking at the actual damages you experienced because of the insurance company’s bad faith actions. This can include the amount the insurance company should have originally paid on the claim, plus any additional financial losses you suffered, like interest or costs from not having the use of your car.

On top of that, if the court finds that the insurance company’s actions were particularly wrong, you might also get extra money as a penalty to the insurance company, known as punitive damages. These are meant to punish the insurance company and discourage them from acting in bad faith again.

Lastly, courts may award attorney’s fees and legal costs to you so that the cost of suing doesn’t come out of your pocket. The goal is to make you whole, as if the bad faith had never occurred, and sometimes to penalize the insurance company to prevent similar actions in the future.

How Long Does a Bad Faith Claim Take Until You Get Compensated?

The timeline for an auto insurance bad faith claim can vary greatly and depends on several factors such as the case’s details, the insurer’s willingness to settle, and the legal process in your area. It might be resolved in a few months if the insurance company decides to settle out of court to avoid a lawsuit. There’s no exact guaranteed timeline, because they are all different. However, if the case involves detailed legal arguments or if the insurance company contests the claim vigorously, it could extend to a couple of years, especially if it goes to trial and then through an appeals process.

The negotiation phase and any mediation efforts can also influence how long it takes before you receive compensation. An attorney with experience in auto insurance bad faith cases can give you a general idea of the expected timeline, considering the usual court schedules and the complexity of your particular situation. It’s crucial to brace yourself for a journey that may be quite drawn out and intricate.

Do Auto Insurance Bad Faith Claims End in Settlement or Go to Court?

The outcome of whether a bad faith claim against an auto insurance company will settle or proceed to trial can be as unpredictable as the timeline for compensation. Personal injury lawyers typically advocate for a settlement to expedite the compensation process, but insurance companies may resist settling if they are confident in their stance that they did not behave in bad faith. Below is an analysis of the factors that influence some bad faith claims to reach a settlement, while others end up in court.

Factors That Make a Bad Faith Claim Likely to Settle:

1. Clear Evidence: If there is indisputable evidence that the insurance company acted in bad faith, they may prefer to settle rather than risk a court judgment.
2. Avoiding Publicity: Insurance companies may settle to avoid the negative publicity that could come with a public trial.
3. Costs of Litigation: Both parties may find settlement more cost-effective than the expenses associated with a lengthy trial.
4. Strength of the Case: If the policyholder has a strong case, the insurance company might settle to avoid a potentially larger payout ordered by a court.
5. Insurance Company Policies: Some companies have policies to settle claims quickly to maintain customer satisfaction or to manage caseloads.
6. Time Factor: Both parties might want a quicker resolution, which settlement can provide, as opposed to the longer process of going to trial.
7. Risk Management: Settling can be a way for the insurance company to control the risk and predictability of the outcome.
8. Mediation Success: Effective mediation can lead to settlement if both parties reach a satisfactory agreement through a mediator.

Factors That Make a Bad Faith Claim Likely to Go to Court:

1. Disputed Evidence: If there’s a dispute over the facts or the interpretation of the insurance policy, the case may require a court to decide.
2. Legal Precedents: Sometimes parties go to court to establish or challenge legal precedents, particularly in cases that could affect future claims.
3. High Value of Claim: If the claim involves a large amount of money, the insurance company might litigate in the hope of reducing the payout.
4. Strategic Reasons: The insurance company may choose to go to court as a strategy to deter future bad faith claims.
5. Unclear Policy Language: Ambiguities in the insurance policy’s language may require a judge’s interpretation.
6. Insurance Company Denial: If the insurance company refuses to acknowledge any wrongdoing, they may push for a court decision.
7. Punitive Damages: If the case involves the potential for punitive damages, the insurance company may defend aggressively in court to avoid setting a costly precedent.
8. Principle or Message: Sometimes, a case goes to court because the parties want to send a message or stand on principle, regardless of the potential costs.

Comparing the two lists, it’s clear that the likelihood of settling or going to court hinges on the clarity of the case, the potential costs involved, the strategic interests of the insurance company, and the desired speed of resolution. Cases with clear evidence and mutual interest in quick resolution tend to settle, whereas cases with complex legal questions or significant financial stakes are more likely to go to court.

What Evidence Do Car Accident Lawyers Go After to Prove Bad Faith?

Car accident lawyers may seek various types of evidence to prove that an auto insurance company acted in bad faith, including:

• Policy Documents: Lawyers will review the insurance policy in detail to understand the coverage and to show that the claim should be covered under the terms of the policy.
• Claim Files: They will examine the insurer’s claim files, which could reveal how the claim was processed and if there were any unjustified delays or denials.
• Correspondence: Any letters, emails, phone call logs, and other communication between the claimant and the insurer can be crucial. Lawyers look for evidence of stalling, non-responsiveness, or refusal to pay without reasonable cause.
• Internal Company Documents: This may include guidelines, procedures, and internal memos that could indicate the company has a practice of not adhering to industry standards.
• Witness Statements: Testimonies from those who were involved in the claims process, like claims adjusters or other insurance company employees, could support the case.
• Recordings: Recorded conversations between the claimant and the insurance company’s representatives may contain evidence of misleading information or other bad faith actions.
• Medical Records and Reports: In the case of injury claims, medical documents can help prove the extent of injuries and the expected costs, which the insurance company might have ignored or undervalued.
• Financial Documents: Proof of financial losses suffered by the claimant due to the insurer’s bad faith can also be part of the evidence.

The goal is to compile a comprehensive set of documents and testimonies that collectively show the insurance company did not act in good faith in handling the insurance claim.

Do Personal Injury Lawyers Take on Bad Faith Legal Claims Against Auto Insurance Companies?

Yes, personal injury lawyers often take on bad faith legal claims against auto insurance companies. Bad faith claims fall within the realm of insurance law, which is closely related to personal injury law. Since personal injury lawyers deal with insurance companies as part of their routine practice, they are well-versed in the tactics that insurance companies might use to minimize or deny legitimate claims.

The Millar Law Firm handles bad faith legal claims against auto insurance companies, as part of our practice area in personal injury law. We are experienced in challenging insurance companies that attempt to minimize or deny legitimate claims, ensuring our clients receive the rightful compensation they deserve.