Breach of Insurance Contract
When you purchase insurance it is suppose to provide you with peace of mind that you have protected yourself and your family in the case of an accident, illness or other catastrophic event. The costs of this “protection” seems to increase every year even if you do not make a claim. It is when you most need the protection you have paid for that claims get wrongfully denied by an insurance company. Miss a payment, your coverage lapses or is terminated. When an insurance wrongful denies payment, there is a little a person can do without the assistance of an attorney.
Insurance contract and policies are usually very difficult to understand. They are purposefully written that way so people often do not fully understand what they are entitled to under the policy. They usually have specific requirements that you must comply with before you are entitled to benefits. For example, most health insurance policies require you to notify the insurance company before undergoing a non-emergency surgery or obtaining a MRI. In addition, if your claim is denied the policy usually has its own procedure, which you often must follow, to appeal the decision. Some policies attempt to require you to arbitrate a dispute as opposed to pursuing your rights in court.
Your insurance company, along with its adjusters or claim processors, may be liable for failing to pay you on a legitimate claim. In determining whether a claim should be paid, you have to examine the policy itself along with what the insurance company actually did or should have done.
Your insurance company may seek to avoid paying on a claim or cancel your insurance for a number of reasons including: failure to receive premium payments; alleged misrepresentations on the insurance application; or a particular person or event was not covered by the insurance contract.
The law governing insurance contract disputes often depends on whether the insurance plan is created under state or federal law. ERISA (Employee Retirement Income Security Act) plans are governed by federal law and offer much more protection to insurers than those created under state law.
Generally, as it is the insurance company that drafts the insurance contract, it is strictly construed against the insurance company. Ambiguities are usually interpreted to favor the insured. In addition, provisions within the policy may be found to be invalid against public policy.
There are a number of ways in which an insurance company can breach its contract. Common situations include:
• Failure to investigate a claim
• Denial of a legitimate claim
• Denial of benefits as outlined in a contract
• Unreasonably interpreting a contract
• Failure to provide a defense against a claim
• Delayed or insufficient payment to you
• Delayed or insufficient payment to a person making a claim against you
An insurance company’s obligations to the insured include what is contained within the insurance contract as well as what is required by law. If an insurance company fails to honor its obligations it has breached its contract and will be required to pay what it should have under the contract. In addition, you may be entitled to attorney fees.
A claim may also be brought against an insurance company for negligent performance under an insurance policy.
An insurance company may be liable for bad faith in the performance or nonperformance of an insurance contract. To establish a claim for bad faith, you must show: (1) the absence of a reasonable basis for denying a claim; and (2) the insurance company’s knowledge or reckless disregard of the lack of a reasonable basis for denying a claim. What constitutes a “reasonable basis” is usually dependent on the facts of each particular case.
Bad faith can arise from a breach of insurance contract, uninsured or underinsured claim. A bad faith claim may not be brought by an injured person against a motor vehicle insurance company for failing to settle a case. More simply, you cannot sue another’s driver insurance company for failing to offer you enough money. However, depending on the circumstances, an at-fault driver may have a case against his or her insurance company for failing to offer its policy limits to an injured person.
Contact Lapin Law Offices if your claim for insurance benefits, whether automobile, health, life or other, was wrongfully denied by an insurance company.