Understanding Bad Faith Insurance Practices In Florida

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The Florida Supreme Court disciplined several attorneys involved in a bad faith insurance claim against Progressive Insurance, WCTV Tallahassee reports.

In that case, Progressive followed a policy of refusing to pay out valid claims, until policyholders started a class action lawsuit.

As policyholders, we expect insurance companies to be there for us when we need them most. But insurance companies are in a unique position to take advantage of consumers who file claims, who are often financially vulnerable or unaware of their rights.

Luckily, Florida law provides consumers with the right to sue insurers who follow bad faith insurance practices. Bad faith insurance practices are practices by which an insurance company does not fulfill the obligations that their policies might reasonably appear to create.

Two Types of Bad Faith Claims

First-party Party Claim

A “first-party” bad faith claim refers to when an insurance company refuses to pay a claim or undertakes an inadequate investigation of one. In first-party cases, the claimant is also the policyholder.

For example, an insurance company might refuse to pay a claim for water damage, even though the policyholder has provided all the necessary documentation.

Third-party Party Claim

A “third-party” bad faith claim refers to when an insurance company refuses to pay a claim or defend the policyholder in a lawsuit brought by someone else.

For example, if you’re in a car accident and the other driver sues you, your insurance company has a duty to defend you in court.

If the insurance company refuses to do so or does not adequately investigate the accident, you may have a third-party bad faith claim.

Three Key Bad Faith Insurance Practices

1. Refusing to Settle Claims.

According to section 624.155 of the Florida Statutes, it is a bad faith insurance practice for an insurance company to not attempt to settle claims in good faith when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.

Let’s break that down a little.

First of all, what does it mean to settle claims “in good faith”?

The statutes of Florida don’t define this term explicitly. In general, “bad faith” means intentional dishonesty, especially when one party enters into an agreement without intending to fulfill it. Just because an insurer makes the wrong decision about whether a policy covers a claim doesn’t mean that they are acting in bad faith. But when an insurer misrepresents the policy, this will be a bad faith practice.

  1. Failing to State Coverage.

Another practice that is bad faith under Florida insurance law is for an insurance company to make claims payments to insureds or beneficiaries that are not accompanied by a statement setting forth the coverage under which payments are being made.

The idea here is that the insured can only understand whether or not the insurance company is following the terms of the policy if the insurer provides the language from the policy that justified their decision. It’s possible that multiple sections of the policy might apply, and the beneficiary needs to know which parts of the policy have gone into effect in order to identify whether they still have more money coming from a different part of the policy.

  1. Failing to Promptly Settle Claims.

A third practice that Florida law identifies as a bad faith practice is for an insurance company to fail to promptly settle claims, when the obligation to settle a claim has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

This means that an insurance company is trying to leverage the payment they owe under one portion as a bargaining chip in their negotiation for settlement on another portion of the policy.

This is a bad faith practice because the insurer should pay out the portion of the policy they obviously owe regardless of how negotiations are going for a settlement on another part of the policy. There is an exception for liability coverage.

How Is Bad Faith Proven?

In order to prove that an insurance company acted in bad faith, you must show that the insurer intentionally withheld payment or deliberately mishandled the claim. This requires more than just showing that the insurer made a mistake or was negligent. You must be able to show that the company’s actions were intentional and that they didn’t have a good faith reason for their decisions.

If you can prove these things, you may be able to recover damages from the insurance company in addition to the payments you receive for your claim. This can include compensation for pain and suffering, as well as punitive damages.

Bad faith insurance practices are serious offenses in Florida, and if you believe that your insurer has mishandled your claim, you should speak with an experienced attorney to learn more about your legal options.

How an Attorney Can Help You

If you believe that your insurance company is not acting in good faith, you may want to speak with an attorney. An attorney can help you gather evidence to support your claim and can also deal with the insurance company on your behalf. Bad faith insurance claims can be complex, and it’s important to have an experienced attorney on your side.

Get Legal Help

If you are involved in an insurance dispute, you need expert legal assistance. Get in touch with an experienced Insurance Claims Lawyer at Johnson & Williams, serving Orlando, Florida, and surrounding areas, to review your insurance claim.