What is “Bad Faith”? Bad Faith refers to a claim an insured person has against an insurance company that won’t honor a policy or pay a legitimate claim. At this point in time, it should be no surprise that some insurance companies delay payments in order to keep your money. Some legal consultants are saying that, because of the current recession, insurers are using delay tactics in order to make their bottom lines look better than they actually are to please their stockholders. And, as we saw with the government-sponsored financial bailouts of corporations such as Citicorp and AIG, we know the bottom line is sometimes an illusion that eventually implodes. On top of that, the insurance industry is not federally regulated, and some bad faith cases have found in favor of the insurer, stating that it is not required to disregard the interests of its shareholders and other policyholders when evaluating claim and that insurers need not put insured ‘s interests ahead of its own. For example,the judgment in Austero v. National Cas. Co of Detroit, Mich.1978 states: “An insurer is not required to pay every claim presented to it. Besides the duty (of good faith, which is the opposite of bad faith) to deal fairly with the insured, the insurer also has a duty to its other policyholders and to the stock holders…not to dissipate its reserves through the payment of meritless claims.”
Contrary to that view, other cases have had the opposite judgment upheld, suggesting the insurer must place its insured’s interests above its own or its stockholders’ interests in maximizing profits, as in McCormick v. Sentinel Life Ins. Co. 1984 that found: “The duty (of good faith) does require an insurer to place the interests of its insured above its own or its stockholders’… We accordingly reject (the view that)…there is an equivalent duty…owed to an insurer’s stockholders which may be balanced against the duty owed to its insured.” Most people believe the latter when they buy insurance and feel overwhelmed and powerless when insurers don’t want to pay. And even though each state has their own insurance departments that enforce provisions of their state’s insurance regulations, it can still be difficult to recover money for a cheated policyholder. Because bad faith cases are complex and because most policyholders feel powerless going against insurance companies, most victims of bad faith find it useful to hire an experienced insurance attorney to fight for them.
Here at the Brod Law Firm we wonder what the future may hold for policyholders, considering the current political and economic climate and the instability of the stock market. Now, more than ever, large insurance companies, like any other large company, will fixate on the bottom line of making profits and providing returns to their stockholders. The more claims a company pays, the weaker its bottom line will appear. To avoid all that, insurance companies may withhold or refuse payment or use delay tactics to hang onto your claim payment as long as possible. Despite all of this, we have the experience and skills needed to fight and win any case involving insurance bad faith.