You pay insurance premiums with the expectation that your insurance company will compensate you after an accident, such as a car crash. However, insurance companies need to make a profit.
They profit when you pay premiums for protection but do not file claims. They also profit by denying claims as much as possible. Bad faith insurance laws make it illegal for insurance companies to deny valid claims.
Negotiating a claim
Rather than denying a claim outright, insurance companies sometimes try to negotiate with you about the amount of compensation. But what if your insurance company offers you an absurdly low offer that does not even begin to cover your expenses from the accident? Is that bad faith?
Whether a lowball offer is bad faith depends on the circumstances. Sometimes insurance companies will first offer a low settlement but do not expect you to accept it. They may be expecting you to counter with a higher number and assume that negotiations will begin from there and result in some type of compromise.
In that situation, bad faith is likely not present. The insurance company could simply be using smart business practices.
Watch for signs of bad faith
When an insurance company refuses to negotiate, this is a sign of potential bad faith. If you counter a lowball offer with a higher number and the insurance company refuses to budge, you could be the victim of a bad faith insurance practice.
This is especially true if the number offered by the insurance company does not even begin to cover all your costs from the accident. Remember that you have a responsibility to provide the insurance company with documents proving your damages so that compensation costs can be calculated correctly.
For example, if the insurance company offers you a settlement that only covers half your medical expenses, make sure you send them documentation for all expenses. If you have sent in complete documentation and they continue to refuse to pay you or fight with you over every penny, it might be time to consider pursuing a bad faith insurance claim.