Imagine being involved in a car accident, filing an insurance claim, and then facing endless delays or an unjust denial from your insurance company. This is known as bad faith insurance, and such practices are surprisingly common. Policyholders should understand bad faith insurance practices and the legal rights they have if they find themselves in this scenario.
At the Cottle Firm, our Henderson bad-faith lawyers help policyholders take legal action when their insurance providers fail to uphold the terms of their policies. If you have recently filed a claim that was unjustly denied or delayed, you may have grounds for a bad faith insurance claim against your insurance provider. Contact our Henderson bad faith lawyers today at 702-722-6111 to learn more about your legal options in a free consultation.
Types of Bad Faith Insurance Practices
Bad faith insurance occurs when an insurance company fails to honor its obligations to policyholders by acting unreasonably or unfairly. Insurance contracts are bound by a duty of good faith and fair dealing, which means that insurance providers are legally required to abide by the terms of their policies. Bad faith insurance is a violation of these legal requirements.
There are many forms of bad faith insurance practices, and each one of them can be harmful to the policyholder’s financial and emotional well-being. Here are some common examples.
Denying Claims Without a Valid Reason
Insurance companies often attempt to minimize their payouts so that they can maximize their profits. These companies sometimes deny legitimate claims without providing a valid reason or explanation. For example, let’s say a homeowner files a claim for damage caused by a storm. The insurance company then claims that the policy does not cover such events, despite clear policy language that states the policyholder should be covered. This is bad faith insurance.
Failure to Investigate
Insurance companies are required to conduct thorough investigations for all policyholder claims. Failure to do so can constitute bad faith. For example, an insurer might deny a medical claim without reviewing all medical records or speaking with the policyholder’s physicians. This can result in unjust claims denials that leave policyholders to cover their own losses.
Unreasonable Delays
Delaying the processing of claims without justification can cause significant financial difficulties for policyholders. For instance, an insurer might take months to process a straightforward auto accident claim, which could cause avoidable financial hardship for the policyholder. Insurance companies sometimes use this tactic to pressure policyholders to settle for less than they deserve.
Misrepresentation of Policy Terms
Providing incorrect information about coverage or policy terms to avoid paying a claim is another form of bad-faith insurance. This might involve an insurer claiming a policy exclusion applies when the language of the contract shows that it clearly does not. Misrepresentation of policy terms misleads policyholders and deprives them of the benefits they are rightfully entitled to.
How to Recognize Bad Faith Insurance Practices
Insurance policies are based on trust, but unfortunately, sometimes insurers break this trust by engaging in bad faith. Identifying bad faith practices early can help policyholders protect themselves. Here are some common warning signs that your insurer may be guilty of bad faith.
Lack of Communication
Consistent failure to return calls or respond to inquiries is a common sign of bad faith. Insurance companies are legally obligated to communicate with policyholders. Ignoring or delaying communication may indicate an attempt to avoid fulfilling their contractual obligations.
Unjustified Claim Denials
Denying a claim without a reasonable explanation is a clear sign of bad faith. Insurers are required to provide sufficient reason for their decisions. When they fail to do so, it is often a sign that they are not acting in the best interests of the policyholder.
Lowball Settlement Offers
Some insurers offer significantly less than a claim is worth to minimize their payouts. Policyholders should be wary of settlement offers that do not cover their actual losses. In general, it is best to consult with an experienced bad-faith insurance lawyer to evaluate the fairness of the offer.
Nevada Bad Faith Insurance Law
Nevada insurance policyholders are legally protected by the Unfair Claims Settlement Practices Act (UCSPA). The National Association of Insurance Commissioners (NAIC) created the Model Unfair Claims Settlement Practices Act to set standards for the investigation and disposition of insurance claims. Nevada adopted the UCSPA in 1975 under Nevada Revised Statute §686A.310 and has since made significant amendments to adapt to changing needs and legal implications.
Differences Between the NAIC Model Act and Nevada’s UCSPA
While Nevada’s UCSPA shares many similarities with the NAIC Model Act, several differences set it apart.
Private Right of Action
Nevada’s version of the UCSPA specifically allows first-party claimants to sue their insurance providers for damages resulting from unfair practices. This means that if your insurance provider engages in bad faith, you may sue them. This clause is known as the private right of action and is not included in the NAIC Model Act. Nevada is one of only ten states to permit such private lawsuits against insurers.
Third-Party Claims
Nevada’s Supreme Court has ruled that third-party claimants do not have a private right of action under NRS 686A.310. Instead, they must file a complaint with the Nevada Insurance Commissioner.
For example, if you were injured in a car accident caused by a negligent driver, you would not have the right to sue that driver’s insurer for bad faith. However, you could file a personal injury claim based on the other driver’s negligence.
No Preemption of Common Law Bad Faith
Under common law, a bad faith claim arises when an insurer fails to honor the duty of good faith and fair dealing inherent to every insurance contract. Common law bad faith focuses on the insurer’s broader conduct, including unjustified refusal to pay claims, failure to investigate claims properly, or attempting to settle for an unreasonably low amount.
The UCSPA does not have the same broad conduct threshold as common law bad faith. Instead, it targets specific actions that Nevada legislators have determined to be unfair, such as:
- Misrepresenting pertinent facts or insurance policy provisions
- Failing to acknowledge and act reasonably promptly to policyholder communications regarding claims
- Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims
- Denying claims without conducting a reasonable investigation
- Failing to affirm or deny coverage within a reasonable time after proof of loss statements have been submitted
Elimination of the “General Business Practice” Requirement
The NAIC Model Act says that a practice can only be considered unfair if it happens often enough to constitute a general business practice. This means that isolated incidents typically do not amount to violations under the Model Act.
Nevada’s UCSPA removes the “general business practice” requirement, which suggests that even a single instance of bad faith can constitute a violation. However, this interpretation has been subject to debate in Nevada courts. In Hart v. Prudential Property and Casualty Insurance Co., the court suggested that a single violation could be sufficient. However, the statutory language and subsequent rulings suggest that the intent is to address patterns of behavior.
Definition of Insurer
The NAIC Model Act defines an insurer as any entity involved in the insurance industry, including brokers, adjusters, and third-party administrators. Nevada expanded upon this definition by adding independent adjusters to the NAIC’s definition. Nevada’s broader definition ensures that all relevant parties, including those involved in adjusting and processing claims, are subject to the same regulatory standards.
What Damages Are Available in Nevada Bad Faith Claims?
Under Nevada’s UCSPA, first-party claimants can recover various types of damages suffered due to bad faith practices.
Interest
Policyholders can recover interest for delayed payments as compensation for the time value of money lost due to the insurer’s failure to pay claims quickly. This provision is designed to prevent claimants from suffering financial hardship due to the insurer’s delays.
Attorney’s Fees
Claimants may recover attorney’s fees incurred while pursuing bad faith insurance claims. This helps alleviate the financial burden of those seeking justice and ensures that policyholders can afford legal representation.
Consequential Economic Damages
First-party claimants can recover consequential economic damages directly resulting from the insurer’s bad faith. These damages cover financial losses that arise as a consequence of the insurer’s actions, ensuring that policyholders are compensated for all losses.
Emotional Distress
Bad faith insurance practices can be extremely stressful for policyholders and often result in emotional distress. However, claimants may need to provide evidence of a physical manifestation of emotional distress to qualify for these damages.
Punitive Damages
Punitive damages are available when an insurer has engaged in fraud, malice, or oppression. To qualify for punitive damages, the policyholder must demonstrate that the insurer consciously disregarded their interests.
Most other types of lawsuits have a punitive damages cap of three times the amount of actual damages, but there is no cap on punitive damages in bad faith insurance claims. In some cases, the amount of punitive damages awarded may exceed the actual damages recovered in the bad faith claim.
Filing a Bad Faith Insurance Claim in Henderson
If you believe you were a victim of bad-faith insurance practices in Nevada, you may have grounds for legal action against your insurer. Follow these steps to pursue a claim:
Gather Evidence
Collect all relevant documents, including communications with the insurer, policy details, and any evidence of the insurer’s misconduct. This could include emails, letters, phone call records, and any other documentation that shows the insurer’s bad-faith actions.
Contact a Henderson Bad Faith Lawyer
Contact a lawyer experienced in bad faith cases for a case evaluation and legal advice on your best course of action. A lawyer can help determine the strength of your case and increase your chances of a successful outcome.
File a Complaint
Your lawyer will help file a formal complaint that outlines the insurer’s bad-faith actions. This typically involves drafting a detailed complaint that specifies the facts of the case, the insurer’s violations, and the damages suffered.
How a Henderson Bad Faith Lawyer Can Help
At the Cottle Firm, our bad-faith lawyers understand Nevada’s complex insurance laws and are committed to guiding our clients through the claims process.
Claim Evaluation
During an initial consultation, your lawyer can evaluate the details of your claim and help you determine whether you should take legal action for bad faith.
Policy Analysis
A bad-faith lawyer can analyze your insurance policy to understand the coverage, exclusions, and the insurer’s obligations. During this analysis, they will look for any discrepancies or breaches of the policy by the insurer.
Claim History Review
Your lawyer will examine the full history of your claim to identify any potential patterns of bad faith, such as delays, inadequate investigations, or unwarranted denials. Any identified patterns will be used to build the foundation of your case.
Communication Scrutiny
All communications between you and your insurer are scrutinized for any instances of misrepresentation, improper requests for information, or other bad faith practices.
Negotiations and Settlements
Insurance companies employ teams of lawyers who employ tactics to minimize payouts or deny reasonable claims. Our Henderson bad-faith lawyers understand how to negotiate with these companies and will do so on your behalf to ensure you are not taken advantage of.
Litigation
Although many cases are resolved through a settlement, litigation may be necessary when a fair settlement cannot be negotiated. When this happens, a bad faith lawyer can represent the policyholder through each step of the legal process, from filing the lawsuit to courtroom representation, when necessary.
Nevada Statute of Limitations for Bad Faith Claims
The statute of limitations for filing a bad-faith insurance claim is generally four years. This period begins from the date the bad faith act occurred or when you reasonably discovered the bad faith conduct. You should keep track of this timeline, as failing to file a claim within the statute of limitations may result in a forfeiture of your right to take legal action.
Contact Our Henderson Bad Faith Lawyers
If you believe your insurance company has acted in bad faith, don’t wait to seek the justice and compensation you deserve. The experienced Henderson bad-faith lawyers of the Cottle Firm are here to help you take legal action. Contact us today at 702-722-6111 and take the first step toward securing the compensation you are entitled to.