Insurance companies have a legal obligation to treat their insureds fairly and to act in good faith when handling claims. They don’t always do. Instead, even when an insurance company is presented a legitimate claim they sometimes investigate as if their insured has done something wrong. You paid you premiums all those years, yet they may look for reasons not to pay.
Insurance bad faith in North Carolina involves a breach of the insurance agreement with some other tortious conduct. North Carolina courts have interpreted insurance bad faith to mean that the insurance company did not have an honest disagreement about the applicability of a policy or an innocent mistake occurred in the handling of a claim. When damages occur to an insured resulting from insurance bad faith, they may be entitled to three times the actual damages incurred as a form of punishment to the insurance carrier.
Insurance companies may expose themselves to a bad faith claim when they fail to look after their insured the way they should. For example, when an insured is sued, the insurance company has a duty to settle the case if they can do so within the policy limits. Insurance claims handlers play a dangerous game when they put their insured at risk by failing to settle a case and instead force a trial in an attempt to save the insurance company money. When a judgment occurs that exceeds policy limits and the insurance company did not settle a case they could have, the insured might have a bad faith claim against the insurer.
Insurance companies also owe a duty to their insured to not misrepresent coverage. People have a right to expect the insurance company to cover what they say they’ll cover. Misrepresentations by an insurance agent or broker can result in a big problem for the insured that bought a policy with the understanding they’d be covered.
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