Insurance companies may have a short-term financial incentive to deny claims. Putting profits above people can lead to bad faith denials.
Fortunately, most insurance companies do not deny claims unreasonably, as a financial institution must earn the trust of its clients to succeed. However, that does not mean you should not prepare to deal with unreasonable denial.
What is unreasonable denial?
According to Washington’s Insurance Fair Conduct Act (IFCA), a claimant may bring an action to the superior court to recover damages if they believe an unreasonable or bad faith denial occurred. Insurers must, by law, treat the needs of their customers with the same vigor as their financial compulsions. If an insurer wants to deny a claim, they must present valid reasons. You have a right to know why you did not receive payments for your claim. If the insurer rejects your claim after a considerable delay or without proper investigation, this may be a sign of rejection in bad faith.
What can I recover?
If a court finds that the insurer denied your claim unreasonably, they may be liable for damages in the amount of three times the original sum you requested. Also, the IFCA allows you to seek payment for your attorney fees and litigation-related costs. It’s important to note that the IFCA does not apply to health insurance claims. Bad faith denials for health insurance are covered by the Washington Patient Bill of Rights. Also, only the primary policyholder or direct beneficiary of a policy can invoke the IFCA against their own insurance company.
Claim denials can make an already difficult situation much worse. If you believe an insurance claim was not adequately investigated or considered before a denial was issued, you may be able to seek compensation.