Lowball insurance settlements are a form of bad faith insurance

Insurance companies, like other businesses, want to turn a profit by providing services to the public. Typically speaking, insurance companies make a profit off of policyholders who don’t have to file significant claims and can take financial losses if they have to pay out substantial claims for massive property damage or permanent injury caused by a policyholder.

Both federal and state laws regulate how insurance companies respond to claims brought by either policyholders or those injured by a policyholder in a motor vehicle collision. Insurance companies have an obligation to reasonably compensate those with valid claims and to abide by the terms of the policy contract between them and their customers.

Unfortunately, because a claim represents a financial loss, some companies will do just about anything to reduce how much they pay per claim or how many claims they approve. Low settlement offers intended to deprive individuals of future compensation are one example of so-called bad faith insurance practices that make it so important to know your rights when negotiating a personal injury claim.

What is bad faith insurance?

As you can likely deduce from the terminology, bad faith insurance involves a company denying someone’s reasonable claim in a manner that demonstrates bad faith or a violation of the terms in the initial policy.

Denials are a common form of bad faith insurance, although low settlement offers that the company knows won’t truly offset someone’s costs are another example. Indefinitely denying the approval or payment of a claim can also result in claims of bad faith insurance.

What can you do after a bad faith settlement offer?

As someone who has paid for insurance or who has suffered injuries in a crash caused by someone who holds the policy, you have a reasonable right to expect coverage that will compensate you for property damage and medical expenses, as well as other costs related to the crash, such as lost wages due to missing work.

It is possible to push back against a lowball settlement offer and request more compensation. In some cases, you may have to take an insurance company to court, at which point they may wind up compelled to pay your claim and could even wind up responsible for punitive damages if you can demonstrate that the claim denial was clearly in bad faith.