What is Insurance Bad Faith?
In Florida, when a person has to sue their own insurance company for failure to pay a claim, they typically can only recover the amount of the benefit owed under the policy. For example, in a lawsuit over a denied disability insurance claim, the insured person can recover the amount of the disability benefit. However, insurers have an obligation to engage in good faith claims handling. If the insurer does not, it is often called unfair or deceptive claim practices, and the insurance company may be exposed to paying more damages than just the policy benefit for its bad faith actions.
Not every denial by an insurance company is bad faith. If the insurer has a reasonable basis for denying a claim, even if the insured may dispute that basis, that would not be bad faith by itself. Some examples of bad faith actions are found in Florida Statute Section 626.9541 which outlines what are “Unfair methods of competition” and “Unfair or deceptive acts or practices.” Part of the statute explains:
(1) UNFAIR METHODS OF COMPETITION AND UNFAIR OR DECEPTIVE ACTS.—The following are defined as unfair methods of competition and unfair or deceptive acts or practices:
(a) Misrepresentations and false advertising of insurance policies.—Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:
1. Misrepresents the benefits, advantages, conditions, or terms of any insurance policy.
2. Misrepresents the dividends or share of the surplus to be received on any insurance policy.
3. Makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy.
4. Is misleading, or is a misrepresentation, as to the financial condition of any person or as to the legal reserve system upon which any life insurer operates.
5. Uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof.
6. Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any insurance policy.
7. Is a misrepresentation for the purpose of effecting a pledge or assignment of, or effecting a loan against, any insurance policy.
8. Misrepresents any insurance policy as being shares of stock or misrepresents ownership interest in the company.
9. Uses any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the state or the Federal Government is responsible for the insurance sales activities of any person or stands behind any person’s credit or that any person, the state, or the Federal Government guarantees any returns on insurance products or is a source of payment of any insurance obligation of or sold by any person.
You may also have to prove that the insurance company engages in the bad faith act frequently enough for it to be considered a business practice (rather than an isolated one time event).
Bad faith claims are not easy to bring, but the unfair claim practices law is a great tool to help you win your claim and also recover the damages you sustain when an insurance company has committed bad faith.
If you have questions about insurance company bad faith, call insurance attorney John V. Tucker at (727) 572-5000. Our firm handles bad faith insurance claims throughout Florida.