An insurance policy represents a set of mutual promises. You, as the policyholder, promise to pay premiums for certain coverage in the event there is an accident, loss, or event. The insurance company, in turn, promises to provide coverage when you have a claim.
In reality, insurance companies often delay, deny or underpaid valid insurance claims. There are two common reasons why insurance companies engage these tactics: (1) insurance companies increase profits when claims are not properly paid and (2) insurance companies know that most policyholders will not challenge them.
Protecting Policyholders
Louisiana has enacted several laws designed to protect policyholders from insurance companies that abuse their position of trust. These laws create duties and legal protections for the benefit of policyholders. The goal of these laws is to ensure that claims are adjusted, investigated, and settled in a prompt and fair manner.
In Louisiana, insurance companies are required to adjust and pay claims within a certain period of time. Failure to abide by these deadlines can result in financial penalties levied against the insurance company. These penalties include additional damages and attorney’s fees, in addition to the money owed for your claim. ir
In Louisiana, the two most prominent laws penalizing insurance company bad faith conduct are Louisiana Revised Statute § 22:1982 and § 22:1973. La. R.S. § 22:1982 regulates how insurance companies can handle the claim’s payments and adjustments. La. R.S. § 22:1973 details the duties insurance companies have to the policyholders, including their duty to act in good faith.
Proving A Bad Faith Claim In Louisiana
To show that an insurance company acted in bad faith, you, as the policyholder, has the burden of proof. This means that you must present evidence that the insurance company acted in bad faith. An experienced attorney can help build your bad faith claim and bring it in court.
There are numerous and ever-changing ways that insurance companies act in bad faith. Here are some common examples of bad faith:
- Undervaluing claims
- Delaying adjustment or payment of claims with no legitimate reason
- Misrepresenting terms of the insurance policy
- Pressuring a policyholder not to hire an attorney
- Ignoring portions of the claim during investigation and adjustment
- Canceling or changing any term of the insurance after making a claim
- Failure to communicate with the policyholder
- Failing to assign qualified personnel to adjust and investigate your claim
- Consistent requests for unnecessary or previously sent documents, causing delays
La. R.S. § 22:1973 – Six Ways To Prove An Insurance Company Acted In Bad Faith
The term “insurance bad faith” is often thrown out anytime someone believes they have been mistreated by their insurance company. It is important to recognize that bad faith has a specific legal meaning in Louisiana. La. R.S. 22:1973 creates a duty of good faith and fair dealing that insurance companies must abide by. An insurance company breaches this duty when it violates one of six separate requirements specified in this law.
- Misrepresenting pertinent facts or insurance policy provisions relating to any coverages at issue.
- Failing to pay a settlement within thirty days after an agreement is reduced to writing.
- Denying coverage or attempting to settle a claim on the basis of an application which the insurer knows was altered without notice to, or knowledge or consent of, the insured.
- Misleading a claimant as to the applicable prescriptive period.
- Failing to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause.
- Failing to pay claims pursuant to R.S. 22:1893 when such failure is arbitrary, capricious, or without probable cause.
If an insurance company breaches this law, you may be entitled to two times the damages sustained, or $5,000, whichever is greater. Damages sustained isn’t necessarily just the insurance benefits the insurance company should have paid in the first place. It may also include other damages caused by the insurance company’s bad faith.
La. R.S. § 22:1892 – Deadlines for Adjustment and Payment of Claims
La. R.S. 22:1892 creates a series of specific time periods for insurance companies to handle and pay claims. An insurance companies that fails to abide by these time periods may be required to pay penalties and attorney’s fees. It is important to recognize that violations of 22:1892 are based on a failure to abide by time periods and does not require the policyholder to prove that the insurance company acted in an arbitrary or capricious manner.
Thirty Days to Pay: One of the most important timelines under La. R.S. 22:1892 is the thirty-day timeline for the insurance company to pay once it has received satisfactory proof of loss. Once the insured provides satisfactory proof of loss that is covered by the policy, the insurance company is generally required to pay the amount of a claim within thirty days.
Satisfactory proof of loss generally means evidence or proof that the insurance company’s responsibility to pay is reasonably certain. For example, if your home was damaged by a hail storm and you presented a proof of loss with estimate of the damage, within 30 days, the insurance company should either pay the claim or inspect the property and pay any undisputed amount to the policyholder.
Failure to pay the amount owed can subject the insurance company to a penalty of 50% of the amount owed, or $1,000.00, whichever is greater, plus attorney’s fees.
Initiation of Loss Adjustment: Your insurance company is normally required to initiate a loss adjustment of a property damage claim and of a claim for reasonable medical expenses within fourteen days after your provide notification of a loss. In the case of catastrophic loss, if it is declared an emergency or disaster, then the deadline may be extended for a one-time additional 30 days.
Failure to initiate loss adjustment can subject the insurance company to a penalty two times the amount owed, plus attorney’s fees.
All insurance companies are required to make a written offer to settle any property damage claim, including a third-party claim, within thirty days after receipt of satisfactory proofs of loss of that claim.
La. R.S. § 22:1892 Penalties for Insurance Companies
If an insurer fails to make a payment within thirty days after an insured’s demand or receipt of satisfactory written proofs, including a third-party claim, then the insurer may be subject to a penalty. The penalty can be 50% of the damages to be due to the insured, or $1,000, whichever is greater. If partial payment has been made, then an insured may be able to recover 50% of the damages, or $1,000, whichever is greater, along with reasonable attorney’s fees and costs.
An insurer can be found to have acted in bad faith if their actions are arbitrary, capricious, or without probable cause. This means that the denial or undervalued settlement is unreasonable and unfair. If that is the case, then the insurer may be penalized for their bad faith actions.
La. R.S. § 22:1892 Auto Insurance Claims
Vehicle owners in Louisiana may have their claims unfairly denied or undervalued, where legal action may be taken. When an insurance policy provides for the adjustment or settlement of a vehicle, the insurer can elect a cash settlement based on the actual cost to purchase a comparable vehicle. To determine the cost, a fair market value determination or retail cost may be used. If an insurance company undervalues the vehicle, legal action can be taken.
When making a payment incident to a claim, no insurer can require that repairs are made to a motor vehicle in a specified place, shop, or entity.
A third party may claim property damages on their personal vehicle if it resulted from a direct consequence of the inactions of the insurer, and they were deprived of use of the personal vehicle for more than five working days, excluding weekends and holidays. The insurer may be responsible for payment of the claim and reasonable expenses by the third party in obtaining alternative transportation for the entire period of time during the third party is without the use of their own vehicle. Failure to make such payment within thirty days after receipt of adequate written proof and demand shall subject the insurer to, in addition to the amount of such reasonable expenses incurred, a reasonable penalty 10%, or $1,000, whichever is greater, along with reasonable attorney’s fees.
Damages For Bad Faith Conduct And Unfair Trade Practices
If bad faith is established, damages can be recovered, including:
- Two times the actual damages, or $5,000, whichever is greater
- Reasonable attorney’s fees and costs
- For certain failures, insurance companies may be required to pay, in addition to the amount of loss, 50% of the damages, or $1,000, whichever is greater\
What Should You Do If You Believe Your Insurance Company Has Acted In Bad Faith?
If you believe your insurance company has acted in bad faith, then you should contact a Louisiana insurance lawyer today. We at My Insurance Case will determine the best avenue to prove your bad faith claim. We will fight your insurance company to get you the compensation you deserve. Contact us today to schedule your free consultation.
