In almost all relationships between an insured party and the company from which the policy was purchased, the insured policyholder is in a relatively powerless position to influence the insurer’s behavior. In a dispute between the insured and insurer, the insured is almost always the David facing Goliath.
Because of this inequity in power in the insured-insurer relationship, courts and legislatures have attempted to level the playing field by highly regulating insurance companies and creating legal remedies for insured parties wrongly denied the insurance benefits purchased in good faith. As a result, an insurer has the fiduciary duty toward a policyholder to act honestly, fairly, and in the insured’s best interest in its dealings, including handling, settling, and paying valid claims in good faith.
When an insurer violates this duty, Florida law provides the insured the legal remedy of a bad faith insurance claim. Common examples of insurance company actions that are likely to be found to have been made in bad faith include:
- Unreasonable delay in processing claims
- Failure to adequately investigate the underlying facts
- Failure to reasonably communicate with insured parties about the status of claims
- Failure to accept reasonable settlement terms when defending covered liability actions against insured parties
- Refusal to settle or denial of claims that are valid and reasonable
- Offers to settle claims for less than their values
- Unreasonable requests for documentation, proof of loss, or additional professional opinions
- Claim denials based on alleged mistakes or omissions on original applications or for reasons inconsistent with policy terms or insurance company representations about coverage
In Florida, bad faith insurance claims may be based on a statute passed by the legislature or on the common law, meaning judge-made law. Which kind of lawsuit is available or the better choice depends on the individual situation, and knowledgeable legal counsel should be consulted for guidance.
An essential factor in this choice is the types of remedies available. An insurance lawyer can educate a potential claimant about whether he or she might be able to recover money in addition to the initial insurance claim, even over the policy limits, such as for legal fees or punitive damages, meant to punish the insurer for bad behavior.
Insured Floridians who have to fight with their insurance companies for fair claim settlements can be put into serious financial positions in which, because of the insured but unreimbursed losses, they cannot pay bills, credit accounts, and mortgages as well as provide for basic needs at home or in businesses.
In such situations, insured parties should not hesitate to discuss their legal rights and potential legal remedies, including possible bad faith claims, with experienced insurance counsel regularly representing insureds in disputes with insurance companies.