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Navigating the Legal Landscape: A Breakdown of Bad Faith Claims

Bad faith claims: House Bill 837 has emerged as a pivotal piece of legislation in the realm of insurance, reshaping the parameters within which insurers and claimants operate. In this blog, we will dive into the intricacies of the bill and provide you with a comprehensive breakdown of the updated bad faith claims.

Table of Contents

1. What Does Bad Faith Claims Entail?

2. What Are the Foundations of the New Bill?

3. What is Prohibition of Bad Faith Lawsuits?

4. What Would a Real-Life Scenario Look Like?

5. How COBIA Fosters an Environment of Transparency and Trust

What Does Bad Faith Claims Entail?

What exactly do we mean by bad faith claims? Before diving into the nitty-gritty of the bill, it’s essential to understand the concept itself.

Bad faith claims occur when an insurance company fails to fulfill its contractual obligations to the policyholder. This failure can manifest in many ways, such as unjustly denying a valid claim, unreasonably delaying claim processing, or offering inadequate settlement. 

In essence, bad faith claims address situations where the insurer does not act fairly and honestly in handling the policyholder’s claim.

What Are the Foundations of the New Bill?

At its core, House Bill 837 establishes a set of requirements that determine what qualifies as a bad faith claim. This includes rigorous criteria for assessing the actions of insurance companies and the maximum amounts they may be obligated to pay. The bill seeks to strike a balance between protecting the interests of insured individuals and maintaining a fair and equitable environment for insurers.

What is Prohibition of Bad Faith Lawsuits?

One of the groundbreaking aspects of House Bill 837 is the prohibition of bad faith lawsuits under specific conditions. If an insurer pays the insured on time either the requested amount or the policy limits – whichever is less – within 90 days of receiving notice of the claim, bad faith lawsuits are effectively barred. This provision aims to expedite the resolution process and incentivize insurers to act swiftly in addressing claims.

What Does Good Faith Duty Mean?

Central to the framework of the passed bill is the concept of “good faith.” Policyholders, claimants, and representatives are obligated to provide information regarding the claim in a manner that aligns with good faith practices.

This duty serves as a foundation for fair dealing and transparency throughout the claims process. Notably, a judge may consider whether any party involved failed to act in good faith, potentially impacting the damages awarded against the insurer.

What Would a Real-Life Scenario Look Like?

To illustrate the practical implications of bad faith claims, here is a real-life scenario that would fall under this umbrella:

  • Janet, an insured individual, provides substantial evidence supporting her claim to the insurance company. However, the insurer fails to respond within the specific timeframe and fails to fulfill its obligation under the policy. In this case, House Bill 837 empowers Janet to pursue a bad faith claim against the insurer. 

This highlights the bill’s commitment to holding insurers accountable for untimely and inadequate responses to insurance claims.

How COBIA Fosters an Environment of Transparency and Trust

At COBIA, we strive to be far more than just a typical insurance company. We prioritize building meaningful relationships with clients and fostering an environment of full transparency. That’s how we’ve earned a 95% renewal rate with clients. Working with our team allows you to focus on your operations, knowing you have an insurance partner you can fully trust. Please contact us today to take the first step towards an honorable relationship and learn more about our insurance solutions.

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