When you purchase insurance coverage, you sign a contract in good faith with a company that you trust will cover problems like car accidents or medical emergencies.

What happens when the insurer refuses to pay out for a claim that the insurance policy covers? Are you the only one the company is denying coverage to?

Traditional bad faith

Your insurance company should carry out its duty in good faith, requiring it to treat its policyholders reasonably and fairly. Bad faith insurance refers to the insurer reneging on the contract you signed to cover your house, car, or health.

Bad faith occurs when:

• A claim does not get paid promptly
• Not paying the total claim
• Denying claim before an investigation
• Stating it cannot cover an issue, even when there is coverage in the policy
• Making threatening statement

Institutional bad faith

Institutional bad faith goes beyond an insurance company or agent giving you a raw deal by not covering the issues detailed in your contract. This type of bad faith affects the total of the policyholders the company covers.

Institutional bad faith means the company imbedded improper conduct into its policies and procedures. Improprieties come from middle or top management. Because of this, you and others may have a claim for a class-action lawsuit.

Review your insurance policy periodically to understand the coverages you have and how the insurance company should payout on any claim you may submit. It will also allow you to know if your insurance company is steering you wrong. For help, reach out to Manfred, APC and our San Diego insurance law attorneys can help.