Types of Compensation in a Bad Faith Insurance Lawsuit
Policyholders of an insurance business may be entitled to several kinds of compensation should bad faith practices be used by it. Bad faith results from an insurer's unjust denial or delay of a valid claim, improper investigation neglect, or otherwise transgression of its duty to operate in good faith. In a bad faith insurance lawsuit, the damages a policyholder might get usually fit numerous categories.
Contractual Exchanges
In a bad faith claim, contractual damages are the easiest kind of restitution. Under the terms of the insurance policy, these were the damages the policyholder was originally due. If an insurance company falsely denied a fire damage claim, for instance, the policyholder would be entitled to the amount the policy guaranteed to pay for the loss—that is, the cost of replacements or repairs. Contractual damages only bring the policyholder back to their financial situation if the insurance company paid the claim.
Adversarial Effects
Apart from contractual damages, policyholders could also pursue consequential damages. These address the financial damages brought about by the bad faith activities of the insurance business. For instance, such extra expenses could be reimbursed as consequential damages should a homeowner's fire claim be delayed or denied, resulting in either missed mortgage payments or temporary accommodation for a protracted period. These damages seek to offset the financial loss resulting from the insurer's non-good faith claim handling.
Punitive Penalties
Punitive damages are granted in circumstances whereby the behavior of the insurance company is judged particularly malevolent or extreme. Although not often granted, punitive damages punish the insurer and discourage future bad-faith behavior. Usually meant to convey to the insurer the gravity of its misbehavior, the award for punitive damages might be somewhat large. Usually, nevertheless, this kind of reimbursement calls for establishing that the insurer behaved either deliberately or carelessly.
Psychological Anxiety
Policyholders may also occasionally be able to get reimbursement for emotional suffering brought on by insurers' bad-faith behavior. Especially in the case of significant losses like storm or fire damage, handling an insurance company that delays or rejects a valid claim can lead to worry, anxiety, and difficulty. Paying for emotional suffering is supposed to recognize the non-financial effects the bad faith behavior of the insurer has caused on the policyholder.
Conclusion
Policyholders in a bad faith insurance claim can receive contractual damages, consequential damages, punitive damages, and emotional distress compensation. These kinds of payments seek to make the policyholder whole and hold the insurance firm responsible for its conduct.