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Are simple mistakes considered to be acts in bad faith?

On Behalf of | Nov 15, 2021 | Firm News |

In essence, an insurance policy is like a contract. The insured pays premiums to the insurance company. In return, if the insured has a valid claim the insurance company will compensate them per the terms of the policy. Unfortunately, sometimes the insured will try to take advantage of this system and try to claim that their insurance claim was handled in bad faith. This can put an insurer in a tough situation that they must defend against.

What is bad faith insurance?

Bad faith insurance refers to measures an insurer will take to try to avoid paying the insured what the insured is entitled to. For example, the insured may accurse the insurer of misrepresenting terms in the insurance policy, using nondisclosure provisions to their advantage and declaring exclusions in an effort to avoid paying a claim. Bad faith claims can be made no matter what type of insurance policy is at issue.

What acts do not constitute bad faith insurance?

Not all acts that lead to nonpayment of a claim are done in bad faith. For example, simple mistakes are not acts of bad faith. In addition, if the insured and insurance adjuster disagree on the adjuster’s opinion of the value of what was lost, this is not an act of bad faith unless the adjuster refuses to explain the facts that support their opinion.

Insurers in Las Vegas can avoid acting in bad faith by simply explaining why they will not cover the insured’s claim. As long as they do not ignore evidence supporting the insured’s claim and do their fair due diligence, insurers can avoid bad faith claims.

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