Insurance Bad Faith FAQs
There is often a large power imbalance between insurance companies and claimants. If you have been treated unfairly by your insurance company or have reason to believe that your insurance company has unlawfully delayed payment or denied your claim, it is important to speak with a Wisconsin insurance bad faith attorney as soon as possible. At Studinski Law, LLC, we have extensive experience handling various types of insurance disputes and have helped countless individuals hold insurers accountable for bad faith practices. Contact our experienced bad faith insurance lawyers today at (715) 343-2850 for a case evaluation.
Basics of Insurance Bad Faith
What Is Insurance Bad Faith?
An insurance policy is a contract between the insurer and insured. Every insurance policy implies a duty of good faith and fair dealing. As a fiduciary, insurers must treat insured parties fairly, reasonably, and with the same consideration, it gives its own interests. When an insurance company breaches its duty of good faith and fair dealing during the investigation, evaluation, or processing of a claim, you may have a claim against them for insurance bad faith.
What Are Some Common Examples of Insurance Bad Faith?
Insurance bad faith involves unfair actions by the insurance company towards policy holders or claimants. Some examples of insurance bad faith may include:
- Unreasonable delays in processing claims
- Denying claims without a reasonable basis
- Unreasonably low settlement offers
- Failure to fairly, promptly, or fully investigate claims
- Ignoring a policyholder’s request for clarification or information
- Unreasonable interpretations of the policy
- Overly burdensome and unreasonable requests of the claimant
- Failure to defend a policyholder
What Are the Elements of a Bad Faith Claim in Wisconsin?
To prove bad faith against an insurance company, a claimant must establish that there was no reasonable basis for the insurance company’s action, e.g., denying a claim for benefits under the insurance policy, and that in denying the claim, either knew or recklessly failed to ascertain that the claim should have been paid. An insurance company is permitted to challenge claims that are “fairly debatable,” which means that it has a reasonable basis for denying a claim or coverage is arguable.
What is the Difference Between First-Party and Third-Party Bad Faith Claims?
There are two main categories of insurance bad faith claims–first party and third party. First-party bad faith claims involve conduct by an insurance company such as unreasonable delay or denial of a claim as to its own policyholder. A third-party bad faith claim deals with the insurance company’s failure to defend or settle a dispute against their policyholder in a fair and equitable manner.
About Insurance Claims in Wisconsin
What Are the Insurance Company’s Obligations When I Submit a Claim?
Under Wisconsin law, insurance companies have certain legal obligations to claimants. Those include, but are not limited to:
- The claims adjuster has a duty to help the policyholder with the claim.
- The insurer must promptly and fully investigate every claim.
- If payment is owed, an insurer must promptly pay the claim.
- If the insurer denies a claim, it must have a reasonable basis for doing so and provide an explanation to the policyholder.
- The insurer must disclose significant facts to its policyholder.
Violating any one or more of these obligations may constitute insurance bad faith. Bad faith claims practices can involve almost any type of insurance policy.
When Can an Insurer Deny a Claim?
Insurers can deny payment of claims when claims are reasonably debatable. Under Wisconsin Statutes Section 628.46, insurers are required to promptly pay insurance claims if the loss is covered under the policy and harm has been sustained. If a claim is not paid within 30 days after the insurer receives notice of a covered loss and the amount of loss, the insurance company is obligated to pay 12 percent interest per year on the claim. Unreasonable denials and delays can give rise to an insurance bad faith claim.
What Should I Do If My Claim is Denied?
If you believe that your claim has been unlawfully denied, you should contact a Wisconsin bad faith attorney as soon as possible to discuss your options. At Studinski Law, LLC, our experienced bad faith lawyers can determine whether the insurance company has acted in bad faith in denying your claim, help you understand your rights, and fight for the compensation you rightfully deserve.
What is the Best Way to Avoid Having My Claim Unfairly Denied?
Having an attorney by your side from the very beginning of the claims process is the best way to protect your interests, avoid becoming a victim of bad faith practices, and secure a fair settlement from the insurance company. At Studinski Law, LLC, our bad faith insurance attorneys have in-depth knowledge of the tactics used by insurance companies to unfairly deny coverage and are tireless advocates for our clients throughout every stage of the claims process.
Insurance Bad Faith Law
What is the Wisconsin Unfair Claims Settlement Practices Act?
The Unfair Claims Settlement Practices Act establishes standards for insurance companies operating within Wisconsin and is intended to promote prompt, fair, and equitable settlements between policyholders/claimants and insurers. Some examples of unfair settlement practices or methods are:
- Failure to promptly acknowledge pertinent communications with respect to claims arising under insurance policies
- Failure to attempt in good faith to effectuate fair and equitable settlement of claims submitted in which liability has become reasonably clear
- Knowingly misrepresenting to claimants pertinent facts or policy provisions relating to coverages involved
- Failure to adopt reasonable standards for investigation of claims arising under its insurance policies
Can I Report Unfair Insurance Practices to the State of Wisconsin?
Yes, if you feel that you are being treated unfairly by your insurance company you can make a complaint to the Wisconsin Office of the Insurance Commissioner (OIC). When you file a complaint, the OIC will send the complaint to the insurance company and require them to respond directly to you with an explanation of their actions within 20 days.
The OIC will then review the insurer’s response to verify that they have complied with state law and your policy and notify you of their determination. However, the OIC cannot direct the insurer to pay the claim or address any issues they cannot legally enforce. This is why, in addition to making a complaint with OIC, you should consult with an insurance bad faith attorney.
What Is the Statute of Limitations for an Insurance Bad Faith Claim?
Insurance bad faith claims have a statute of limitations, or time limit on when a related lawsuit can be filed. Generally, insurance bad faith is an intentional tort with a two-year statute of limitations. You must conduct an investigation and negotiate with the insurance company within that amount of time. If you fail to file a lawsuit before the two-year deadline and no other resolution is reached, you may lose your right to bring an insurance bad faith claim. You should consult with an experienced insurance bad faith attorney for a specific analysis of the statute of limitations in your case.
Compensation in Insurance Bad Faith Claims
How Much Is My Insurance Bad Faith Claim Worth?
The value of your insurance bad faith claim depends on the particular facts of your case and the amount of damages you have incurred as a result of your insurer’s bad faith. This can include emotional distress damages, the funds owed under the policy, and the possibility of punitive damages, and attorney fees.
Under What Circumstances Can Punitive Damages Be Awarded?
Under Wisconsin Statutes Section 895.043, the policyholder may receive punitive damages if the insurer “acted maliciously toward the plaintiff or in an intentional disregard of the rights of the plaintiff (policyholder).” Punitive damages are intended to punish the insurer and deter insurance companies from engaging the same wrongful conduct. They do not directly compensate you for losses you’ve incurred.
Can an Insurance Company Make a 'Low Ball' Settlement Offer in Negotiations?
It is very common for insurance companies to begin settlement negotiations with a “low ball” offer in hopes that the claimant will just accept it without knowing any better. The practice by insurance companies of making unreasonably low offers is prohibited in Wisconsin because the law recognizes that insurers are in a superior bargaining position as compared to consumers.
Insurance companies write the policies and have extensive knowledge and resources so it would be unfair for insurance companies to be allowed to employ the low-ball strategy. Even with laws in place to prevent such abuse, insurers routinely engage in this practice. A bad faith insurance lawyer at Studinski Law have knowledge and experience in properly responding to low ball settlement offers from insurance companies.