Fighting Allegations of Insurance Bad Faith

It’s never good news to have your insurance claim denied or paid out for less than you think the claim is worth. But just because an insurance company denies a claim does not mean the insurer did anything wrong — in most cases, insurers are well within their rights to deny unmeritorious claims. However, that’s not how many insureds see things; it’s not uncommon for an insured who is unhappy with the way their claim was handled to allege that their insurer engaged in bad faith. Such claims can cause extensive reputational damage to insurance companies (not to mention potentially huge damages awards). If you’re dealing with an allegation of insurance bad faith, a North Carolina personal injury defense attorney can help you fight it. 

Insurance Bad Faith in North Carolina

Insurance bad faith refers to situations in which an insurer is alleged to have treated a policyholder unfairly, such as by denying a valid claim, unreasonably delaying payment of a claim, or refusing to reasonably settle a claim. In the personal injury context, insurance bad faith lawsuits often arise after an injured plaintiff submits a claim for their injury, whether one sustained via a car accident, slip and fall, defective product, or other personal injury matter, and the claim is denied. Such plaintiffs often suffer serious injuries and accrue substantial medical bills, so they may be highly motivated to pursue insurance bad faith claims. 

North Carolina recognizes two types of insurance bad faith claims: common law and statutory.

At common law, North Carolina courts generally require the party alleging insurance bad faith to show (1) a refusal to pay after recognizing a valid claim, (2) bad faith conduct (i.e., not based on honest disagreement) by the insurer, and (3) aggravating conduct, such as fraud, malice, or reckless disregard. 

On the statutory side, Insurance bad faith is defined at N.C. Gen. Stat. § 58-63-15(11) as including, but not limited to, the following acts: 

• Misrepresenting pertinent facts or insurance policy provisions relating to coverages
• Failing to acknowledge and act reasonably promptly to communications related to claims
• Refusing to pay claims without conducting a reasonable investigation 
• Failing to affirm or deny coverage of claims within a reasonable time 
• Compelling the insured to institute litigation to recover amounts due by offering substantially less than the amounts ultimately recovered 
• Attempting to settle claims for less than a reasonable person would believe himself entitled 
• Failing to provide a reasonable explanation for a claim denial

The North Carolina Unfair and Deceptive Trade Practices Act creates a private right of action for plaintiffs in insurance bad faith claims and allows for the recovery of treble damages and attorneys’ fees. 

Our North Carolina personal injury defense attorneys have experience defending both types of claims. 

Defenses to Insurance Bad Faith 

Insurance companies have several defenses available to them when fighting insurance bad faith claims, including: 

Lack of Coverage

An insurance company cannot pay a claim for an injury that is not covered by the insured’s policy. This defense is typically most compelling when the policy at issue clearly outlines its limitations and exclusions. For example, the insured may have believed their policy covered injuries to additional residents of their home when, in fact, such injuries were not covered. 

Reasonable Basis for Denial or Delay

The crux of insurance bad faith claims is that an insurance company denied a claim or delayed payment without a valid basis. As such, one of the strongest defenses to such allegations is to present evidence that the company had a reasonable basis for the denial or delay. For example, a company could show that a delay in payment was due to an unresolved investigation of liability in a multi-vehicle accident. 

Ambiguity in Claim Language 

Insurance contracts, like all contracts, are subject to interpretation, and reasonable minds can differ over the meaning of certain words therein. For example, an insurer and insured could disagree over whether an injury occurred while getting into or out of a vehicle counts as one sustained while “occupying” the vehicle. While courts may nonetheless interpret ambiguous language in favor of the insured, showing a good-faith dispute over said ambiguity can help avoid a finding of bad faith. 

Bona Fide Dispute 

Insurers and insureds come to dispute many aspects of insurance claims, such as who was liable for the accident, how much the accident is worth, and sometimes even the facts underlying the claim. And some disputes truly are difficult and time-consuming to resolve, such as issues related to causation in medical malpractice cases, for example. The existence of a bona fide dispute can help refute allegations of bad faith. For more information about resolving complex questions of liability, please contact a North Carolina personal injury defense attorney. 

Lack of Cooperation 

Claims investigations take time, patience, and — perhaps most importantly — the candor and cooperation of the insured. Policyholders are required to provide requested documents, give statements, and allow access to the accident site. If an insured fails to cooperate as requested, an insurer may reasonably deny their claim. 

Good Faith Investigation 

An insured may allege insurance bad faith by arguing that their insurance company failed to conduct a proper investigation into their claim. Insurance companies can mitigate such accusations by conducting diligence investigations and keeping detailed records of their investigatory activities. 

Fraud or Misrepresentation 

Insurance fraud and misrepresentation are not uncommon. For example, an insured might commit application fraud by lying to obtain lower premiums or claim fraud by exaggerating the extent of their injuries. Evidence of fraud or misrepresentation by an insured is a strong defense to allegations of insurance bad faith. 

Refute Allegations of Insurance Bad Faith With Help From a North Carolina Personal Injury Defense Attorney

With the specter of treble damages for successful plaintiffs, insurance bad faith claims in North Carolina are serious matters for insurers. The best way to fight them is with the assistance of an experienced attorney. For more information, please contact a North Carolina personal injury defense attorney at Harris, Creech, Ward & Blackerby by calling 252-638-6666 or using our online contact form.