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Can you challenge a settlement as a bad faith insurance practice?
December 22, 2021
Whether you pay for flood damage coverage on your home or for business interruption insurance on your retail company, you carry insurance to protect you from financial losses and liability. When something unpredictable and damaging occurs, you should be able to make a claim against your insurance coverage.
Your insurance provider has obligations to you
under California law
and must uphold the terms of your policy when you need to make a claim. Failing to do so could constitute
bad faith insurance practices
. Often, especially with large claims, the insurance provider could offer a settlement.
You may have accepted the settlement because you had bills to pay. Only afterward did you realize that the settlement actually fell far short of covering your losses. Can you make a claim against the insurance company for bad faith insurance practices over a low settlement offer?
Inappropriate settlements can be a form of bad faith insurance
An insurance provider should offer compensation that reflects the losses suffered by an individual and the value of the policy involved. Although they will want to protect the company’s profit margin, doing so should not come at the expense of policyholders.
If a settlement reflects the highest amount of coverage available, then the insurance company did not violate its obligations to you by paying that amount, even if it is less than your losses. However, if the settlement is far far less than your total policy would cover, it could be an example of bad faith insurance.
The adjuster who offered the settlement may have done so to protect the company from future liability with no regard to the financial implications of that action on you, the policyholder or claimant.
How do you prove a settlement was offered in bad faith?
Convincing the courts that an insurance offer was inappropriate can be a challenge. You will typically need to show that there was more coverage available. You will also need to show that, given historical, similar incidents or the expenses you had already accrued, the insurance company should have known your losses would dwarf the settlement that they offered.
Reviewing your policy end up, as well as the records related to the incident that led to the claim can help you determine if you have grounds for a
bad faith insurance claim