What is duties does the insurance company have?
Learn what you need to know to be successful
The insurance industry’s product is simply a contract... a piece of paper filled with promises,
agreements, conditions, exclusions, and, sometimes, endorsements which modify the basic policy. The key to the insurance industry is its promise of “service,” or the promises backing up the insurance contract that makes it valuable to have. People buy insurance policies and pay premiums for those policies based on the strength of the promise of the insurance company: “Like a Good Neighbor, State Farm is there”; “ You’re in Good Hands with Allstate”.
Some people may go through life without ever submitting an insurance claim. Many will have a minor claim from time to time, but few people have losses which exceed the total amount of premiums paid over the life span of a given policy holder. In insurance language, the insured is defined in the policy as the first party, and anyone else making a claim against the policy is a third party (also referred to as the “adverse party” or the “ claimant”).
If you’ve been injured in a car wreck due to someone else’s negligence, you may be a claimant, seeking compensation from the insurance company for the at-fault driver for injuries and losses caused by that driver.
There are basically five areas in the handling of any claim, and the claim must be handled in good
faith and with fair dealings in each of these areas.
The insurance company must:
1. Determine whether the policy was in force as of the date of loss and whether the allegations against the insured fall within the coverage language.
2. Evaluate the scope and extent of the claimant’s allegations.
3. Decide on the validity and credibility of the claim and claimant.
4. Assess its monetary exposure as to what sum of money will probably be necessary to settle a third party claim and what sum of money it will cost to defend the third party claim; attorney’s fees, costs, expert witnesses, filing fees etc. and
5. Decide if they are going to pay the claim and the amount that they are willing to pay in “out of court” dollars and when they are going to pay the claim. The industry standard is that the claims are (in theory) to be paid “ promptly.”
The insurance company owes a duty of good faith and fair dealings in its handling or processing of any claim. This means that the insurance company cannot place its interests ahead of those of its insured. The insurance company has a duty to promptly, thoroughly and objectively investigate claims and the insurance company must not take advantage of its insured by reason of its size, experience, economic pressures or duress. The insurance company may not unreasonably delay the payment of those benefits to the insured.
Understanding your lawsuit
A breach of the duty of good faith and fair dealings by the insurer in any or all of the respects noted above, dealing with first party claims, may be due to negligence, or may be willful. If punitive damages become an issue, the insurance company’s breach of the insurance policy must be shown to have been particularly outrageous or despicable. Punitive damages are not intended as additional compensation to an injured insured or claimant; punitive damages are designed to punish an insurance company for its wrongful conduct, deter it from repeating that bad faith conduct, and hopefully to get a message through that future wrongful conduct is not acceptable.