You Pay For Security -- Suppose You Don't Get It?
We all pay for lots and lots of insurance, but we rarely understand what we are buying. Let's make it simple.
An insurance company is a business that collects “premiums” and issues “coverage” under the terms of an “insuring agreement,” i.e., an insurance contract.
The consumer should recognize three types of insuring agreements that are often bundled together:
1. Loss Indemnity: If you suffer a “loss,” like the loss of your car in a theft or accident, or the loss of your limb in an accident, the insurance company will “indemnify” you, i.e., pay you the market value of your lost car, and some arbitrary number for your arm.
2. Defense: If someone alleges a claim against you, say for negligently causing a car accident by running a red light, the insurance company will defend you against their claims, up to an agreed level of coverage.
3. Indemnification of Liability: If someone obtains a judgment of liability against you, the insurance company promises to pay it on your behalf.
Insurance Bad Faith
What happens if an insurance company fails to perform one of these duties? Strictly speaking, insurance companies are able to rely upon their contracts. However, bad faith arises when the insurance company goes too far in avoiding its obligations under the contract, and contrives to deprive the insured person of the benefits of coverage. This applies to all kinds of insurance contracts, and has been especially noted in cases of long-term disability insurance, where the endless duty to make payments to covered individuals constitutes a serious financial drain on the enterprise. There have been innumerable instances of insurance bad faith inscribed in the public record of dramatic trials and stunning verdicts, often in seven and eight figures.
Large Extra-Contractual Damages Awards
A plaintiff who establishes that an insurance company acted in bad faith to deprive them of benefits can receive “extra-contractual damages,” including awards for emotional distress and punitive damages. The theory behind extra-contractual awards is that the insurance company provides security as its contractual product, and when it fails to perform that promise, the insurer is liable for all of the emotional distress suffered by the policyholder. The rule is a decent and humanizing one, that all policyholders should take note of.
Talk To A Lawyer
If you have a problem with an insurance company that causes you a loss of expected benefits, seek out an attorney, show them the insurance policy, and ask them if the law of insurance bad faith applies to your case. If they can't answer, ask them for a referral. If you believe you have insurance, and are being denied coverage, you should always strive to obtain the benefits of coverage by engaging counsel.
By Charles Carreon
An insurance company is a business that collects “premiums” and issues “coverage” under the terms of an “insuring agreement,” i.e., an insurance contract.
The consumer should recognize three types of insuring agreements that are often bundled together:
1. Loss Indemnity: If you suffer a “loss,” like the loss of your car in a theft or accident, or the loss of your limb in an accident, the insurance company will “indemnify” you, i.e., pay you the market value of your lost car, and some arbitrary number for your arm.
2. Defense: If someone alleges a claim against you, say for negligently causing a car accident by running a red light, the insurance company will defend you against their claims, up to an agreed level of coverage.
3. Indemnification of Liability: If someone obtains a judgment of liability against you, the insurance company promises to pay it on your behalf.
Insurance Bad Faith
What happens if an insurance company fails to perform one of these duties? Strictly speaking, insurance companies are able to rely upon their contracts. However, bad faith arises when the insurance company goes too far in avoiding its obligations under the contract, and contrives to deprive the insured person of the benefits of coverage. This applies to all kinds of insurance contracts, and has been especially noted in cases of long-term disability insurance, where the endless duty to make payments to covered individuals constitutes a serious financial drain on the enterprise. There have been innumerable instances of insurance bad faith inscribed in the public record of dramatic trials and stunning verdicts, often in seven and eight figures.
Large Extra-Contractual Damages Awards
A plaintiff who establishes that an insurance company acted in bad faith to deprive them of benefits can receive “extra-contractual damages,” including awards for emotional distress and punitive damages. The theory behind extra-contractual awards is that the insurance company provides security as its contractual product, and when it fails to perform that promise, the insurer is liable for all of the emotional distress suffered by the policyholder. The rule is a decent and humanizing one, that all policyholders should take note of.
Talk To A Lawyer
If you have a problem with an insurance company that causes you a loss of expected benefits, seek out an attorney, show them the insurance policy, and ask them if the law of insurance bad faith applies to your case. If they can't answer, ask them for a referral. If you believe you have insurance, and are being denied coverage, you should always strive to obtain the benefits of coverage by engaging counsel.
By Charles Carreon