Insurance Fair Practices
Insurance companies have express and implied obligations they must adhere to in the claims process. Carriers have a duty to investigate and to rationally evaluate claims; they must do so in a timely manner and make reasonable settlement offers in order to protect their insured’s interest. An insured who has paid a premium to an Insurance company for such protections has a contractual right to these benefits under the insurance policy. Further, and perhaps most importantly, an insurance company must provide a defense to the insured – its customer- when claims are made. Typical insurance policies provide that a defense (the immediate appointment of counsel ) and the cost of the defense is required to be provided by the insurance carrier, at no cost to the insured, in order to make sure the insured is protected. A breach of the duty to defend by an insurance carrier is the ultimate failure, as it can result in the insured having to pay out of pocket for a benefit encompassed in their policy and/or exposure to risk that in the absence of protection can result in financial ruin for a party that gets sued.
When the insurance companies ignore these responsibilities to their insured’s, it constitutes a breach of the insurance contract and may give rise to bad faith insurance practices. In such instance, the insured can bring direct claims against the insurance company to recover for the direct losses suffered as a result of the insurance companies actions and/or inaction.