Is that offensively low settlement offer bad faith insurance?

| Mar 6, 2020 | Firm News

You got into a car crash caused by another driver. Maybe they have the same insurance company as you do, or perhaps they don’t have insurance at all, and your insurance policy will cover you because you have uninsured driver protection.

Regardless of the exact scenario, you find yourself waiting for the phone call or letter from your insurance agent advising you that they have finally processed your claim. Receiving a settlement offer can seem like a solution to your financial hardship after a crash. You may not have been able to return to work the day of the collision, to say nothing of all of the medical costs you’ve probably incurred since then.

When you see that settlement offer, you may feel shocked, and not in a good way. Unfortunately, it is a common practice for insurance companies to offer law settlements at a time when they know people will be desperate for any kind of financial windfall. Offering compensation that is lower than the coverage available through the policy and that does not actually cover the costs incurred by the claimant is an example of bad faith insurance.

Insurance companies are subject to strict regulations

Paying out on a claim costs an insurance company a lot of money. While they’re usually happy to accept premium payments from their customers, they might be much less enthusiastic about approving claims for serious medical costs, massive property damage or lost wages.

Given how such claims eat into their profit margin, companies would likely deny even legitimate claims by policyholders if not for legal obligations to pay out a reasonable amount in a timely manner on legitimate claims. When an insurance company refuses to pay or pays an inappropriately low amount for a valid claim, it is said that they have engaged in bad faith insurance practices.

You can seek actual losses and punitive damages in a bad faith insurance case

There are laws at both the federal and state level in Massachusetts that address an insurance company’s obligation to policyholders and claimants. In Massachusetts, when a company denies a claim in bad faith or makes a bad faith settlement offer, it may be possible for the affected party to bring legal action against the insurance company.

Depending on the circumstances of the case, the individual can claim the losses that relate to the bad faith insurance practices and punitive damages. Sometimes, just knowing that a policyholder understands their rights under Massachusetts law can be enough to motivate an insurance company to do the right thing and offer a better settlement. Other times, you may need to follow through with filing legal claims against the company.

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