There are many ways in which your insurer may act in bad faith, some of which are obvious (such as a claim that is rejected outright or a policy that is suddenly canceled after a claim is made). But there are also bad faith scenarios that are more subtle and difficult to detect.

At Haffner & Morgan, LLP, we work with clients every day who have been victims of these devious practices. The keys to fighting back are knowing your rights and working with an experienced attorney.

Understanding Terminology: First-Party Vs. Third-Party Claims

In many liability scenarios, you are dealing with two insurance companies: Your own and the insurance company for the other party. When you file a claim with your own insurance company, it is a first-party claim. Any claim you make against the other person's insurance policy is a third-party claim.

When it comes to allegations of bad faith, you can only pursue legal action against your own insurer (first-party claims). There are no third-party claims of insurance bad faith. That being said, there are plenty of ways that your own insurance company may be acting in bad faith, some of which are listed below.

Recognizing Bad Faith Practices

Here are three examples of bad faith practices that involve undervaluing claims, paying claims late or both.

Undervalued first-party claims: Your claim is worth a certain amount of money, but insurance companies regularly try to settle for as little as possible. Undervalued claims happen with all kinds of insurance but are common with homeowner policies. The insurance company fails to cover certain things listed in the policy or things that should be in the policy (covering the cost of a hotel if you are displaced, for instance).

Unreliable coverage for uninsured or underinsured motorists: If you have an insurance policy that covers you in an accident with an uninsured (UM) or underinsured motorist (UIM), what would have been a third-party claim is now a first-party claim. In cases where the UM/UIM was at fault for the crash, your insurer must generally pay benefits commensurate with your injuries up to policy limits. If your insurer undervalues the claim or rejects it unreasonably, you can pursue a bad faith action against the company.

Breach of duty to pay the undisputed amount of a claim: If you make a claim to your insurer and the company comes back with an offer, that offer is usually considered to be the undisputed value of the claim. Even if parts of the case are being disputed, your insurer has a duty to pay you the undisputed amount in a timely fashion. If it withholds this amount or delays payment for an unreasonable amount of time, it may be grounds for a bad faith action.

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Haffner & Morgan, LLP, is based in San Diego and serves clients throughout Southern California. To take advantage of a free initial consultation, give us a call at 800-511-7834, or send us an email.