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What Are the Elements of a Bad Faith Insurance Claim?

If you have an insurance claim and you are struggling to secure coverage (or if your claim has been denied), you could be dealing with a case of insurance bad faith. While insurance companies have a statutory obligation in Oregon and Washington to treat all claimants fairly, bad-faith insurance practices are common, and they can be extraordinarily frustrating, time-consuming, and costly.

Of course, not all challenges when dealing with the insurance companies amount to bad faith. The insurance companies are well within their rights to fully investigate claims filed under their policies, and the claims process takes time. But, the insurance companies must process claims diligently, and they are prohibited from making claim determinations based on anything other than a good-faith assessment of all of the relevant facts at hand.

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What Do You Need to Prove in Order to Assert a Successful Claim for Insurance Bad Faith?

With this in mind, what do you need to prove in order to assert a successful claim for insurance bad faith? In other words, what are the “elements” of a bad faith insurance claim? Broadly speaking, asserting a bad faith insurance claim in Oregon or Washington requires proof of four things:

  • A valid insurance claim;
  • A delay or denial;
  • Unreasonable or unfair grounds; and
  • Damages.

1. A Valid Insurance Claim

If you do not have a valid insurance claim, then the insurance company does not have to pay. While auto insurance, home insurance, and other insurance policies cover many types of losses, they do not cover all losses under all circumstances. For example, in order to recover compensation under another driver’s auto insurance policy, you must be able to prove that he or she was legally at fault in your accident. If the other driver was not at fault, then his or her insurance company is not liable.

An insurance claim can be either:

  • A First-Party Insurance Claim – A first-party insurance claim is a claim that you file with your own insurer. For example, if your home is damaged in a storm, you would have a first-party claim under your homeowner’s insurance policy.
  • A ThirdParty Insurance Claim – A third-party insurance claim is a claim that you file with someone else’s insurer. The most common example of this is a fault-based auto insurance claim following a vehicle collision.

Both first-party and third-party insurance claims can lead to bad faith delays and denials. If any insurance company wrongfully delays or denies a valid insurance claim, it can potentially be held liable for bad faith under Oregon or Washington law.

2. Resolution of Your Claim Has Been Delayed, or Your Claim Has Been Denied

The second element of insurance bad faith is a delay or denial of your first-party or third-party insurance claim. As we mentioned above, insurance claims take time, so you should not expect a resolution right away, and not necessarily even within the first few days or weeks of filing your claim. But, the insurance claim should process your claim diligently, and you should not be forced to sit through significant unnecessary and unjustified delays.

If your claim has been denied, this should be clear. You should have received a letter from the insurance company informing you that it has determined your claim is not covered under the terms of the applicable policy. Bad-faith delays can be more difficult to judge, and assessing whether this element of your claim is met will generally require the knowledge and insights of an experienced insurance bad faith attorney.

3. The Delay or Denial of Your Claim Was Unreasonable or Unfair

The third element of a bad faith insurance claim is evidence that the delay in the processing of your claim or the denial of your claim was unreasonable or unfair. The standards for establishing liability are different under Oregon and Washington law. Section 746.230(1) of the Oregon Revised Statutes (ORS) prohibits insurance companies from engaging in “unfair claim settlement practices,” including practices such as:

  • “Misrepresenting facts or policy provisions in settling claims;”
  • “Failing to acknowledge and act promptly upon communications relating to claims;”
  • “Failing to adopt and implement reasonable standards for the prompt investigation of claims;”
  • “Refusing to pay claims without conducting a reasonable investigation based on all available information;”
  • “Not attempting, in good faith, to promptly and equitably settle claims in which liability has become reasonably clear;”
  • “Compelling claimants to initiate litigation to recover amounts due by offering substantially less than amounts ultimately recovered in actions brought by such claimants;” and,
  • “Attempting to settle claims for less than the amount to which a reasonable person would believe a reasonable person was entitled after referring to written or printed advertising material accompanying or made part of an application.”

In Washington, RCW Section 48.30.015 prohibits, “[u]nreasonable denial of a claim for coverage or payment of benefits.” Unlike the Oregon statutes, Washington law does not provide a list of specific practices that constitute insurance bad faith. But, in addition to the types of practices listed in ORS Section 746.230(1), numerous other types of practices fall within the definition of bad faith under Washington law, and the Washington Administrative Code establishes certain additional requirements and prohibitions that apply to insurance companies as well.

4. Damages Resulting from Insurance Bad Faith

Finally, in order to recover financial compensation for insurance bad faith, you must be able to prove that you have suffered losses as a result of the insurance company’s bad-faith practices. These losses are referred to as your “damages.” If you have suffered losses as a result of insurance bad faith (e.g., if you were forced to pay out of pocket or the damage to your home has gotten worse), then you may be entitled to compensation above and beyond the original value of your insurance claim, and it will be important for you to speak with an attorney, right away.

Request a Free Consultation at D’Amore Law Group

Has your insurance claim been delayed or denied in bad faith? If so, the attorneys at D’Amore Law Group can help. To schedule a free, no-obligation consultation in Oregon or Washington, call us directly or tell us about your claim online today.

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