Some insureds parties do not understand the obligation of their insurance providers to act in good faith when they make a claim. These insureds expect that their insurance company will handle their claim honestly and fairly, but what can they do if the insurance company balks? Sometimes the insured will take the insurance company’s word that an event isn’t covered by their policy. However, Florida does have an “Insurance Unfair and Deceptive Trade Practices Act” which, allow insured’s a remedy when their insurance company does not handle their claim in good faith.
This law, Florida Statute § 624.155, allows the insured to take legal action against an insurer who, in bad faith, refuses to settle a claim. These actions are usually limited to the dollar amount the coverage provided for in the policy. However, in some cases, punitive damages are recoverable. It is up to the insured to prove that there was an absence of a reasonable basis for denying an insurance claim.
An insurer will often refuse to honor a claim if the information on an insurance form is inaccurate. An inaccurate form means the insurance company did not act in bad faith if they deny a claim. The law does not care if the inaccurate information was a mistake or an attempt to defraud the insurer. The insured’s signature at the bottom of the form verifies that everything on the form is accurate. In most situations there will be no recourse if a claim is denied. However, Florida law provides that if the insurance policy has been in effect for at least two years, the insurer must prove the statement was fraudulent or the mistake will be forgiven. It is important that the information presented to the insurer is as accurate as possible.
The standards that are used to determine if an insurance provider acts in bad faith include, but are not limited to:
- Whether the insurer makes no real or little effort to promptly deal with a claim so the liability of the policy holder can be limited.
- Whether the insurer did not investigate thoroughly therefore there are issues about the amount of the settlement, or lack of settlement.
- Whether the policy holder and the insured disagree about the substance of the coverage.
Although bad faith actions are not necessarily common, they do occur. One of the more common reasons for a bad faith claims is when an insurer fails to properly investigate and evaluate a claim. If this occurs, an insurer may be responsible for punitive damages, in addition to damages to cover the value of the claim itself. If you have any questions regarding the manner in which your insurer has handled a claim, please feel free to call The Law Office of Eric H. Luckman, P.A. for a free consultation.