How Insurance Companies Dodge Good Faith and What You Can Do About It

Cedar Rapids, Iowa – Insurance companies have significant power in our lives, especially when we depend on them during a crisis. Whether it’s after a car accident, or facing a health crisis, when the chips are down, we often have little choice but to turn to our insurance companies for help. 

At the core of their relationship with us is a legal principle known as the duty of good faith and fair dealing. But what does this mean, and how often is it honored?

What is the Duty of Good Faith?

• Promptly and thoroughly investigate claims to assess their validity.
• Communicate transparently about policy terms and claim status.
• Pay valid claims in a timely manner without unjustified denial or delay.
• Avoid deceptive practices or actions that would disadvantage the policyholder.

In simple terms, good faith is about insurers keeping their word and honoring their promises.

Legal Requirements and Protections of the Duty of Good Faith

Every state has laws requiring insurers to act in good faith, and many recognize bad faith as a cause for legal action. While specifics vary, common elements include:

Fair Investigation and Evaluation: Insurers must investigate claims objectively and consider evidence both for and against coverage.

No Unreasonable Denial: Denying a claim without a reasonable basis (or failing to explain the denial) violates good faith.

Prohibition Against Undue Delay: Stalling payments or dragging out investigations for no legitimate reason is a breach of this duty.

Transparency Obligations: Insurers must disclose relevant policy information and explain their decisions.

Policyholders who suspect bad faith can file lawsuits and potentially recover not just the owed benefits but also damages for emotional distress, legal fees, and sometimes punitive damages.

The Problematic Imbalance: How Insurance Companies Put Profits Over People

Insurance companies are businesses, and like any business, their goal is to maximize profits. However, this can often come at the expense of the people they’re supposed to serve. Here are common tactics insurers use to prioritize their bottom line:

1. Lowball Settlement Offers: Insurers might offer significantly less than what a claim is worth, hoping policyholders will accept it out of desperation or lack of knowledge.
2. Delay Tactics: By dragging out the claims process, insurers can pressure policyholders into settling for less or give up altogether. They know you need the money. They know you need it now, but they also know you may need more later for things like physical therapy or further procedures. By getting you to settle early and taking advantage of your need for immediate financial relief, they get out of having to pay for that, which they legally should.
3. Exploiting Vulnerable Customers: Insurers often assume that claimants lack the resources or knowledge to challenge them, banking on compliance rather than confrontation. They’ve spent a lot of time and money on advertising to get their clients to trust them so that when they give a settlement offer, the client takes it at face value.

Why You Shouldn’t Trust Your Insurer to Always Act in Good Faith

Even though the law requires good faith, compliance isn’t always guaranteed. As a policyholder, it’s important to approach every claim with a healthy dose of skepticism. If an insurance company isn’t fulfilling its duty, you shouldn’t feel obligated to take a passive role in the process.

Here’s a blunt truth: Insurance companies are not on your side. Their goal is to pay out as little as possible. So, if they’re not going to act in your best interests, despite what their psychologically manipulating ads may tell you. You shouldn’t assume they will. 

That’s where we come in. Having a seasoned legal warrior at your side to fight for your rights makes all the difference.

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Why You Need a Lawyer

Insurance adjusters handle hundreds, if not thousands, of claims each year and they’re backed by teams of lawyers. Trying to navigate this system on your own is like showing up to a knife fight with a toothpick. 

“I chose this area of law intentionally, because I wanted to practice ethically. I didn’t want to help big corporations take apart this country piece by piece, I wanted to rage against that machine and fight back for the good of the many. That’s what you’re getting when you hire The Biker Lawyers.” – Jon Jansen, Personal Injury Attorney, The Biker Lawyers

Here’s how a lawyer tips the scales in your favor:

1. Leveling the Playing Field: Your lawyer fights solely for you—not a balance sheet.
2. Maximizing Compensation: They’ll ensure you receive fair compensation, including damages you may not have realized you were entitled to.
3. Relieving Stress: With a lawyer handling the claim, you can focus on healing and moving forward.

Final Thoughts: Protect Yourself

Remember, the duty of good faith isn’t just a legal requirement; it’s a moral obligation. If your insurer fails to meet it, make sure they’re held accountable.