Bad Faith Insurance Claims Concerning Coronavirus (COVID-19)
Insurance companies sell policies by convincing us that we should protect ourselves in case the unexpected happens. The unexpected includes things like physical injury, damage to property, harm to our businesses and illness. But insurance companies are not altruistic. They exist to make a profit. They make a profit by paying out less money in claims than insureds pay in premium. Therefore, it is in the best interest of the insurance company to deny claims. Sometimes, an insurance company will engage in bad faith practices to deny a claim.
Bad Faith Practices are Forbidden
Insurance companies owe a duty to their insureds to act in good faith and to deal fairly with them. The reason is that an insurance company is a mammoth organization that usually deals with individuals or small businesses. If the insurance company refuses to pay a claim, the individual or small business has minimal resources to fight the company. Thus, insureds may file lawsuits against insurance companies acting in bad faith to discourage using bad faith practices. In these lawsuits, if the insurance company engages in certain practices, the insurance company can be liable to the insured for its bad faith practices. Such suits are authorized by the common law and also based on statutes modeled after the National Association of Insurance Commissions’ Model Unfair Claims Settlement Practices Act.