Insurance Bad Faith Basics

Perhaps you’ve been in a car accident and heard the term “bad faith” but don’t exactly know what it means. If so, you’re not alone. Bad faith is actually just the abbreviated term for something known as “bad faith failure to indemnify.” This type of legal claim is brought directly against an insurance company when it fails to act properly when handling an insurance claim. But it’s quite a bit more complicated than just a simple breach of contract.

 

Insurance Contracts Explained

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Bad faith is the abbreviated term for something known as “bad faith failure to indemnify” in Missouri. It’s simple contract law at the end of the day.

Missouri law requires all motorists to maintain minimum liability insurance coverage on their vehicle. This is a legal requirement. Without it, you can lose your license or even be fined and charged with a crime in extreme cases. So, when the government forces you to pay money to a private company, there has to be some oversight to make sure the private company is meeting its end of the bargain. Your insurance policy is a contract between you and the insurance company that says if you ever get into an accident, your insurance company will have certain obligations to not only defend you but also to pay any valid claims against you.

 

What is Good Faith or Bad Faith?

Good faith and bad faith are just terms of art or legalese for acting appropriately in an effort to resolve a claim or not. An insurance company that makes diligent efforts to investigate a claim and swiftly pay when there is no reasonable dispute in liability or injuries can be said to act in good faith.

Sometimes there is a person with severe injuries, the other driver admitted liability and pled guilty to the traffic offense, yet the insurance company creates undue delays, ignores its legal obligations, or simply ignores requests for settlement. If the actions are “vexatious” and unreasonable, it may rise to the level of “bad faith.”

 

Who Can Bring a Bad Faith Claim?

In general, there are only two ways to bring a bad faith claim against an insurance company.

First Party Lawsuit – In most circumstances, you can only bring a lawsuit for bad faith against a company with whom you have a contract. In other words, you paid them a premium and they failed to deliver on their promise to protect you in some way. This happens when your uninsured motorist claim is ignored, or your collision coverage is not honored, or where the insurance company fails to defend you or pay someone else’s claim, leaving you personally liable for a judgment.

Third Party Suit – In most cases, you have no legal authority or “standing” to sue someone else’s insurance company, even if they failed to pay a valid claim for your injuries. Instead, the law generally allows the person who hurt you to assign that right to you in exchange for not going after their personal property. This then allows you to sue that insurance company for refusing to pay per their contract.

 

Get Help With Bad Faith Claims

If you believe you were treated unfairly by an insurance company, call the Krause and Kinsman Law Firm today to get aggressive legal representation in your bad faith claim.

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