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How do common law and statutory bad faith claims differ?

On Behalf of | Feb 16, 2022 | Property Damage Insurance Claims |

The responsibility of an insurance company is to negotiate and settle injury or property damage claims in good faith.

When issues develop that require resolution in court, what is the difference between common law claims and statutory bad faith claims?

Investigation and delay

An insurance company should begin work on a claim with a prompt investigation of the matter. In general, the insurer should approve or deny a claim within 15 to 60 days. However, the company might drag out an investigation to see if the policyholder will stop pursuing the claim. However, the policyholder could bring a charge of unreasonable delay against the insurer.

Deceptive practices

Failure to disclose the existence of coverage is one way an insurance company can avoid paying a claim. Another is to notify a claimant of a filing deadline and then not provide the paperwork required for filing on time.

Lowball offers

Insurance companies are always mindful of protecting their bottom line. An insurer demonstrates bad faith by offering a policyholder less compensation than a claim is worth.

Differences in claims

A policyholder can depend on legal guidance to help determine whether an insurance company is acting in bad faith. He or she may decide to take the insurer to court over the issue. In challenging unfair practices, a common law claim requires proof that the company acted in bad faith. A statutory claim is usually based on a lower standard of proof; for example, that the insurance company unreasonably delayed or denied the policyholder’s claim.