Getting Compensation for Insurance Bad Faith

Allegations of breach of contract claims and tort claims. Insurance policies are essentially a contract between the insurance company and the insured. The distinction is important when it comes to the amount and types of compensation.

Insurance companies are bound by the “implied covenant of good faith and fair dealing” that apply to any contract; failing to act in good faith or to deal fairly with their insured constitutes a bad faith claim, which is a tort claim. On addition, the claimant can also sue the insurance company for a standard contract breach under state business laws. The difference between the claims is that exemplary or punitive damages are not allowed under contract law, but may be permitted under tort law, depending on the circumstances. In effect, the insured may sue for more than the face value of the contract’s terms under a tort claim.

Insurance laws in the US are state-specific, so claims for insurance bad faith will be subject to laws that apply in the state where the claim is made. Under Texas law, there are specific limitations and coverages depending on the type of insurance, the nature of the insurance bad faith, and the number of occurrences. According to the website of Dallas-based law firm Smith Kendall, insurance companies employ a number of strategies that may be considered acts of bad faith. However, insurance law can be quite complex, so it is advisable for any potential claimant for an alleged insurance bad faith to consult with a bad faith insurance lawyer with extensive knowledge of tort and contract law in the state and experience in handling claims.

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