What to Do When Insurance Companies Act in “Bad Faith” in Georgia

By Grant Law Office on June 6, 2011

Insurance companies tend to hold one thing above all else: Profit. People buy insurance to financially protect themselves against injury, illness, loss or damaging events and they put their trust in the insurance company to provide fair compensation in the case of any of the aforementioned situations. Unfortunately, many insurance companies look for ways to deny claims, even if they are legitimate, in order to make more money. This has become known as insurance bad faith.

Insurance companies, under law, owe a duty of dealing in “good faith,” or dealing fairly, with their policy holders. If an insurance company violates that duty by denying a valid claim to avoid paying a policy holder the money owed to them, they are operating under “bad faith.” The majority of insurance bad faith cases in Georgia relate to motor-vehicle accidents. Most often, an insurance company acting in bad faith will deny your claim, however, in some cases, the insurance company will deny the full benefits of coverage. For example, if your medical costs after an Atlanta auto accident total $20,000 and your insurance company only allows you $5,000, despite the fact that your claim is justified and your full coverage amount is $40,000, the insurance company is acting in bad faith by not paying full benefits.

Insurance bad faith can arise in several contexts. Generally, anytime an insurance company denies a valid claim without a reasonable basis for doing so, the insurance company is potentially liable for bad faith. This can happen with respect to claims for property damage to automobiles, property damage to homes or other property under a home owner’s insurance policy, failure to settle a personal injury claim within the Defendant insured’s policy limits, or failing to pay benefits due under a long-term disability insurance policy. For more information on insurance bad faith due to the insurance company’s failure to honor its obligations under a long-term disability insurance policy, see our informative blog titled “Insurance Company’s Bad Faith Refusal to Pay Disability Benefits.”

Some claims for bad faith may be based on the breach of a fiduciary duty, while other claims may be based on statutory law. For example, with respect to claims for property damage or destruction arising out of an automobile collision, according to Georgia law, “[in] the event of a loss because of injury to or destruction of property covered by a motor vehicle liability insurance policy, the insurer issuing such policy has an affirmative duty to adjust that loss fairly and promptly, to make a reasonable effort to investigate and evaluate the claim, and, where liability is reasonably clear, to make a good faith effort to settle with the claimant…” (O.C.G.A. § 33-4-7). If an insurer violates this duty, they not only must pay the claimant for the loss, but must also pay the greater of 50 percent of the insured’s liability for the loss or $5,000, as well as all attorney’s fees associated with the action.

Another type of insurance bad faith claim arises when the insurance company fails to settle a case within the policy limits, thereby placing its own financial interest ahead of its insured’s financial interest. This leaves the insured exposed to liability in excess of the available insurance coverage.

Another type of insurance bad faith occurs when an insurance company fails to defend, or fails to timely defend, its insured. For example, an insurance company may interpret the insurance policy in an unreasonable manner and take the position that the claim is not covered and, therefore, the insurance company has no duty to defend its insured in related litigation.

Insurance companies that act in bad faith know that they are in violation of the law, which is why they count on people blindly accepting their claim and benefits decisions. Do not leave it up to the insurance company to determine the validity of your claim or how much compensation you deserve. Speaking to one of the knowledgeable Georgia insurance coverage lawyers at The Law Offices of Wayne Grant, P.C., can ensure that you are not taken advantage of by your insurance company. Call us today to learn more at (404) 995-3955.