When you purchase an insurance policy, you expect your insurance company to act in good faith and fulfill its obligations. Unfortunately, this doesn’t always happen. In some cases, insurance companies may act in bad faith, putting their interests above yours by denying or delaying legitimate claims. Knowing the signs of insurance bad faith is crucial for protecting your rights and ensuring you receive the compensation you’re entitled to under your policy.
In Colorado, insurance bad faith is a serious issue, and the law provides protections for policyholders. If you suspect your insurance company isn’t handling your claim fairly, understanding the signs of bad faith can help you take action.
What Is Insurance Bad Faith?
Insurance bad faith occurs when an insurance company fails to uphold its legal duty to act in good faith and deal fairly with policyholders. Every insurance policy includes an implied obligation of good faith, meaning the insurer must investigate claims promptly, pay legitimate claims without unnecessary delays, and act in the best interest of the policyholder. When an insurer breaches this obligation, they may be acting in bad faith, and policyholders have the right to pursue legal action.
In Colorado, policyholders are protected by both state laws and regulations that govern how insurance companies must handle claims. If your insurer is engaging in unethical or unlawful practices, you may be able to file a bad faith insurance claim to recover damages.
Signs Your Insurance Company Is Acting in Bad Faith
There are several warning signs that may indicate your insurance company is acting in bad faith. While these signs don’t always mean bad faith is occurring, they are red flags that warrant further investigation. Some of the most common signs include:
1. Unreasonable Delays in Processing Your Claim
One of the most common signs of bad faith is when an insurance company takes an unreasonable amount of time to process or pay out a claim. While insurance companies need time to investigate claims, they are required to handle them promptly and efficiently. If your claim is delayed for months without any explanation or justification, it could be a sign that the insurer is acting in bad faith.
In Colorado, insurers are required to respond to claims in a timely manner and cannot unnecessarily delay the process. If your claim is taking too long, you have the right to demand an explanation and take legal action if necessary.
2. Denying a Claim Without a Valid Reason
If your insurance company denies your claim without providing a valid reason, or if the reason given seems insufficient or vague, this could be a sign of bad faith. Insurance companies are required to provide a clear explanation for denying a claim, and they must base their decision on the terms of the policy and the facts of the case.
For example, if your insurer denies a claim for home damage by arguing that it’s not covered under your policy, but your policy clearly states that such damage is covered, this could be grounds for a bad faith claim. Always request a detailed explanation in writing if your claim is denied.
3. Offering a Settlement That Is Far Below the Value of Your Claim
Another common sign of bad faith is when an insurance company offers a settlement that is far below the value of your claim. While insurers have the right to negotiate, they must offer fair compensation based on the coverage provided by your policy. Lowballing a settlement is an unethical practice designed to pressure policyholders into accepting less than they deserve.
If you believe the settlement offer does not reflect the actual value of your losses, consider speaking with an attorney who can review your policy and help you negotiate a fair amount.
4. Misrepresenting Policy Terms
Insurance companies are legally obligated to be honest and transparent about the terms of your policy. If your insurer misrepresents your coverage, misleads you about what is or isn’t covered, or refuses to explain key terms, this could be a sign of bad faith. Policyholders have the right to understand their coverage, and insurers cannot hide behind complex legal jargon to deny valid claims.
Always review your policy carefully and ask for clarification if you believe your insurer is misrepresenting the terms. If necessary, consult with a legal expert who can help you understand your rights under Colorado law.
5. Failing to Investigate Your Claim Properly
Insurance companies are required to conduct thorough and timely investigations into claims. If your insurer fails to properly investigate your claim, ignores critical evidence, or rushes through the process without due diligence, this could be a sign of bad faith.
A proper investigation should involve reviewing all relevant documents, speaking with witnesses, and assessing the facts of the case. If your insurer is cutting corners or refusing to investigate, you may have grounds for a bad faith claim.
What to Do If You Suspect Bad Faith
If you believe your insurance company is acting in bad faith, it’s important to take action quickly. Start by documenting all communications with the insurer, including emails, letters, and phone calls. Keep a detailed record of any delays, denials, or misrepresentations, and request all decisions in writing.
In Colorado, you have legal options if your insurer is acting in bad faith. You can file a bad faith claim to seek compensation for the damages caused by the insurer’s actions, including the amount of the original claim, attorney fees, and sometimes even punitive damages if the bad faith was particularly egregious.
At Fiedler Trial Lawyers, our experienced insurance bad faith attorneys are dedicated to helping policyholders fight back against unethical practices by insurance companies. If you suspect bad faith, don’t hesitate to contact us for a consultation. We’ll help you understand your rights and pursue the compensation you deserve.
If you need legal assistance, reach out to us here to schedule a consultation and discuss your case.
