What is The Insurance Bad Faith Law and Can I Sue My Health Insurance Company?

The premise of insurance is to pay a monthly fee to obtain coverage for when things go wrong, and it can come as quite a shock when your claim is denied when you need it most. Policyholders are covered by the bad faith law but fighting a bad faith insurance claim can be a tough battle, and you should consult with lawyers specializing in medical malpractice at our law firm.

What is the Bad Faith Law?

Bad Faith Law is a tort claim that a consumer may have against an insurance company for bad acts, or for acting in bad faith. Insurance companies owe a duty of ‘good faith and fair dealing’ which by law applies to every insurance contract.

A policyholder can sue on bad faith tort, and a standard breach of contract – punitive and exemplary damages are available in tort, but not consequential damages to breach of contract, thus combining the two suits gives your attempt more traction and will most likely get them to settle early. You may also sue under unfair trade practices laws.

State laws often address bad faith practices, called unfair claims practices acts, aimed at preventing insurers from attempting to reduce claim amounts or unfairly deny claims.

What are the acts considered bad faith in insurance?

There are more to bad faith than just denying a claim or pre-approval. Insurance companies sometimes fail to uphold their express duties, obfuscate their duties, engage in deceptive practices, or fail to uphold their implied duties. This may include:

  • Not responding in a timely manner.
  • Failing to investigate a claim.
  • Failing to provide concrete evidence for the reasons for denial of a claim.
  • Delaying medical treatment with ‘not medically necessary’ denial codes without due diligence, causing further trauma.
  • Claiming application misstatement after passing of the period of contestability.
  • Offering too low a settlement on a claim (take it or leave it).
  • Deny a claim for a covered service.
  • Refusing to settle a conflict.

What do I need to file a bad faith insurance suit?

You will need to show that you have, in good faith, tried to settle the dispute, this will require at least two internal appeal reviews and one external review via your state department.

You need to understand your contract and your policy and what is covered, bring a copy with you to the appointment.

Keep all your correspondence, including written notes regarding phone conversations (date, time, who, what) which they may have recorded.

Do not sign anything they ask you to sign without discussing it with your attorney.

What can I recover?

Recovery will depend on the state you live in and the facts of your case, but it could include:

  • All your economic losses, which includes medical bills, out of pocket expenses related to the denied claim, lost wages or other opportunity and lost interest.
  • All your legal fees.
  • Non-economic losses suffered such as pain and suffering, anxiety, emotional stress, and even loss of consortium.

If you can prove that you were misled when purchasing the policy as to levels of cover the court may order the company to pay all your losses in full, even if more than your limit. In addition, the court may order the company to pay penalties, exemplaries, or punitive damages if they are found to have acted in bad faith.

You need a good insurance lawyer on your side, and if you live in Michigan and need help with a bad faith claim against your insurance company call Eileen Kroll, a registered nurse and personal injury trial attorney, at Cochran, Kroll & Associates, P.C. at 1-866-MICH LAW (1-866-642-4529) for a free consultation. Our law firm never charges a fee unless a recovery is made.

Nikole has a special interest in medical-legal issues and holds post-basic degrees in medical law and business. She has developed quality improvement and safety plans for many practices and facilities to prevent medical-legal issues and teaches several courses on data protection and privacy, legal, medical examinations and documentation, and professional ethics. She has been writing professionally on legal, business, ethics, patient advocacy, research and medico-legal issues in articles, white papers, business plans, and training courses for over thirty-five years.

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