When a car accident occurs, receiving timely and fair coverage under the terms of one's auto insurance policy is critical for those who are injured. Unfortunately, this does not always happen, for one reason or another. In some cases, coverage may have been inadequate or the policyholder's situation may fall outside the scope of what the policy covers, but when the claim is legitimate, the insurance company's refusal to pay is illegal.
Each state has its own standards for what exactly constitutes bad faith insurance, and each case is ultimately decided in the court system. Here in Colorado, there are two points that must be proven in order for a plaintiff to prevail in a bad faith claim.
The first of these points is that the insurer's conduct must be shown to be unreasonable under the circumstances. What exactly constitutes reasonableness is going to be determined by the terms of the policy. The second point that must be proven in a bad faith claim is that the insurance company acted either knowingly or recklessly in disregarding the legitimacy of the policyholder's claim. This means that an insurer must have acted with more than simple negligence in disregarding the validity of the claim.
In determining whether an insurance company acted in bad faith, the measure of reasonableness is based on industry standards rather than the expectations of the insured. Also, state statute allows a policyholder to pursue a bad faith claim when an insurance company causes unreasonable delay or denial of payments. Delay or denial is considered to be unreasonable when there is no reasonable basis for doing so.
In our next post, we'll continue this discussion by looking at some of the potential signs of bad faith insurance.