Insurance companies often gladly collect insurance premiums but then turn their back on policyholders after filing claims. If your insurance company denies your claim or offers you an unfairly low settlement, you can file a bad faith claim against the company.
In Alaska, bad faith insurance laws protect policyholders from unfair or unreasonable treatment by their insurance companies. You should hire a personal injury attorney in Alaska experienced in handling bad faith insurance cases.
What Is Bad Faith Insurance?
Alaska Statutes Title 21. Insurance § 21.36.125 prohibits insurance companies from performing unfair claim settlement practices known as bad faith insurance. Insurance companies must deal fairly and reasonably with their policyholders and investigate and process claims timely and efficiently.
Bad faith insurance happnes when an insurance firm does not act in good faith toward its policyholders. When an insurance firm delays or refuses to process a claim without a reasonable basis, or delays processing a claim without good cause, it may be guilty of bad faith insurance. Insurance companies also commit bad faith by offering low settlements that are not based on the claim’s true value or failing to investigate or evaluate a claim properly.
You could file a bad faith insurance claim against any insurance company, including health insurance, life insurance, and homeowners insurance companies.
What is Good Faith Insurance?
Good faith in insurance is when both the insurer and the insured act honestly and fairly. This means that the insurer does not avoid paying out a claim, and the insured does not inflate their claim. Good faith is an important part of insurance contracts, as it helps to create a relationship of trust between the insurer and the insured.
However, a good-faith claim can also be invoked in personal injury law. If someone is injured due to another person’s negligence, they could sue for damages in good faith. This is because the injured party has suffered a loss due to the bad faith of the other party. Good faith is an important principle in insurance and law, as it helps to protect people from being taken advantage of.
Per good faith laws, insurance companies are obligated to:
- Recognize your insurance claim.
- Investigate the claim promptly.
- Treat you honestly and fairly when determining your claim’s validity.
- Respond faster to your communications.
- Not drag the progression with unnecessary forms.
- Settle any claims against you if the claim lies within the coverage limit.
- Provide actual reasons for denying your insurance claim or delaying the process.
Types of Behavior that Might Constitute Bad Faith
- Unreasonably Delaying or Denying Payment of a Claim
One of the most common types of bad faith insurance happens when an insurance company unreasonably delays or denies payment of a claim. Insurance companies must investigate and process claims on time, and they cannot unreasonably delay payment without good cause.
- Offering an Unreasonably Low Settlement Offer
Another common type of bad faith insurance is when an insurance company offers a low settlement offer, which is not based on the claim’s true value. Insurance companies must investigate claims and make fair settlement offers based on the evidence and information they collect during the investigation.
- Failing to Investigate or Evaluate a Claim Properly
Insurance companies also commit bad faith by failing to investigate or evaluate a claim properly. The companies must conduct a reasonable investigation of every claim they receive. This includes collecting evidence, interviewing witnesses, and evaluating the damages sustained by the policyholder.
- Refusing to Pay a Claim Without a Reasonable Basis
Bad faith insurance can also occur when an insurance company refuses to pay a valid claim without a reasonable basis. Insurance companies must have a good faith reason for denying a claim, and they cannot simply refuse to pay without conducting an investigation.
- Canceling or Terminating Coverage Without a Good Faith Reason
An insurance company can also commit bad faith by canceling or terminating coverage without a good faith reason. Insurance companies can only cancel or terminate coverage for a valid reason. They must give the policyholder notice of the cancellation or termination following the policy terms.
The Difference Between First-Party and Third-Party Bad Faith
In Alaska, the two types of bad faith insurance include first-party and third-party. First-party insurance claims involve policyholders filing a claim against an insurer for refusing to cover damages. Third-party bad faith occurs when an insurer denies a claim made by someone injured by the insured. That means a third party is involved. You sue your insurer for not covering the third party’s damages.
The Alaska Unfair Claims Settlement Practices Act, governs first-party and third-party bad faith claims. Under this law, an insurer can be liable for damages if it violates the Act’s provisions, even if the insured person does not win their underlying personal injury case. To prove a violation of the Act, the injured person must show that the insurer’s conduct was unreasonable under the circumstances.