The Legal Consequences for Insurance Companies That Act in Bad Faith

When an insurance company acts in bad faith, it doesn’t just hurt the policyholder—it can also lead to serious legal consequences for the insurer. Insurance companies are bound by a legal duty to act fairly and in good faith toward their customers. When they fail to do so, they can face penalties that go far beyond paying out the original claim.

If you suspect that your insurance company is acting in bad faith, it’s important to understand the legal ramifications that the company could face—and how Gold, Khourey & Turak (GKT) can help you hold them accountable.

With over 45 years of experience in personal injury law in the Ohio Valley, GKT has seen firsthand how insurers may use bad faith tactics to avoid paying rightful claims. Our experienced attorneys are ready to assist you in getting the justice you deserve.

What Is Bad Faith Insurance?

Bad faith in the insurance industry refers to practices an insurance company uses to avoid honoring its contractual obligations to a policyholder. This includes:

• Delaying claims unnecessarily
• Denying legitimate claims without cause
• Offering settlements much lower than what’s due
• Misrepresenting policy terms

Insurance companies are legally required to act with a certain level of honesty and fairness when handling claims. Failure to meet these obligations can be considered bad faith. If you believe your insurer is acting in bad faith, it’s essential to take action as the consequences for these practices can be significant.

Legal Ramifications for Insurance Companies That Act in Bad Faith

When an insurance company engages in bad faith practices, it opens itself up to a range of serious legal consequences. These can include:

1. Punitive Damages

Perhaps the most significant consequence for an insurance company found guilty of bad faith is the potential for punitive damages. Unlike compensatory damages, which are awarded to cover actual losses, punitive damages are meant to punish the insurance company for particularly egregious behavior and to deter others from engaging in similar conduct.

In the context of bad faith, punitive damages are often awarded when the insurer’s conduct is found to be especially malicious, fraudulent, or wanton. This can include:

• Deliberately denying claims
• Misleading policyholders
• Causing unnecessary delays in processing claims with the intent to avoid payout
• Implementing unfair business practices that violate minimum claim handling standards

The amount of punitive damages can far exceed the original claim and can be a substantial financial penalty for the insurer.

2. Legal Fees and Costs

In addition to compensatory and punitive damages, an insurance company may also be required to pay the legal fees and costs incurred by the policyholder in obtaining the policy benefits to which they were entitled after filing suit.

This is meant to level the playing field and ensure that individuals who have their claims wrongfully denied or delayed by an insurance company do not bear the extra burden of attorney fees and costs incurred when enforcing their contractual rights.

3. Reputational Harm

Beyond financial penalties, one of the most damaging consequences of bad faith behavior for an insurance company is the damage to its reputation. When bad faith practices are exposed, it can cause irreparable harm to the insurer’s public image and credibility.

Negative publicity and press coverage can lead to a loss of trust among current and potential policyholders. Insurance companies rely heavily on consumer confidence to drive their business, and if they are seen as untrustworthy or dishonest, it could result in losing clients and business partners.

How Gold, Khourey & Turak Can Help

At GKT, we have over four decades of experience fighting for clients who have been wronged by insurance companies. Our bad faith attorneys are highly skilled at identifying when an insurer has crossed the line and are ready to help you navigate the legal process to hold them accountable.

Here’s how we can assist you:

• Investigating Bad Faith Claims: We’ll thoroughly examine your case to determine if your insurer’s actions qualify as bad faith. This includes reviewing the denial, delay, or underpayment of your claim and investigating whether the insurer failed to meet its legal obligations.
• Pursuing Legal Action: If bad faith is evident, we’ll fight for the damages you deserve. We will pursue compensatory damages to cover your losses, along with punitive damages if the insurer’s conduct is especially egregious.
• Maximizing Your Settlement: Our team will work diligently to ensure that you’re not only compensated for your injury-related expenses but that you also receive additional penalties or damages resulting from the insurer’s bad faith actions.
• Protecting Your Interests: We take pride in representing individuals, not large corporations. Our firm will be there every step of the way to protect your rights and ensure that the insurance company is held responsible for its actions.

Need Help? Get Help. Get GKT.

If you believe you are being wronged by bad faith insurance practices, you don’t have to face the insurance company on your own. GKT is here to fight for your rights and hold the insurer accountable for their misconduct.

Our attorneys are licensed to practice law in Ohio, West Virginia, and Pennsylvania, and we’re available 24/7 to assist you.

Call us at (304) 845-9750, chat with us live online, or fill out our online form to schedule a free consultation.

Need help? Get help. Get GKT.