Wisconsin state law requires insurers to act in good faith when processing the claims of their policyholders. In a nutshell, this means that they cannot deny claims arbitrarily or use questionable means in an attempt to unfairly deny someone their claim.
Broadly speaking, insurance regulations are covered in chapter 631 of the state statutes. The various subchapters spell out many different rules that the insurance companies are required to follow. Sections 631.61 through 631.95 are particularly important as they spell out specific methods that insurance companies may not use to deny a claim or to deny coverage; things like requiring genetic tests and HIV tests.
Insurance companies do not necessarily have to violate a specific term of a statute to be found guilty of dealing in bad faith, however. Another requirement is that they provide a reasonable basis for denying the claim — in other words, the impetus is on them to demonstrate why the claim should not be paid. If they can be shown to have knowingly denied a claim without a reasonable basis to do so, or acted in reckless disregard of a lack of a reasonable basis, then they can be found to be acting in bad faith.
If it is left to the court’s opinion as to whether or not the insurance company acted in bad faith, the court will usually take a series of steps to determine this. The first step is to compare the actions of the insurance company to those of a hypothetical insurer acting reasonably in response to the claim. They will then review whether the insurance company conducted a proper investigation of the claim, again comparing their actions to what a reasonable and fair insurer would have been expected to do.
Bad faith law continues to be further shaped and refined over time by cases brought before the state Supreme Court. For example, a 2011 case (Brethorst v. Allstate) established that policyholders can incorporate a breach of contract claim into their bad faith claim. Prior to that, it was assumed that a breach of contract claim had to be filed separately. And in the 2010 case Roehl Transport vs. Liberty Mutual Insurance Co., the court established that insurers may be liable for sums within the deductible amount when they have found to have been acting in bad faith.
Damages that can be recovered by the policyholder include not just the difference between what they were paid and their policy limit, but also losses related to expected use of the proceeds of the insurance coverage, recovery of attorney’s fees, and even potentially punitive damages if the insurance company acted in reckless disregard of the rights of the insured party.
So what are some of the tactics insurance companies might use to unfairly deny a claim? Some examples include trying to claim that you reported erroneous information on your application to invalidate your policy, dragging out an investigation for an excessive amount of time, attempting to offer a much lower initial settlement to trick policyholders into settling, or asking for documentation that they know is impossible for you to provide. Bad faith laws were created specifically to address the common practice of insurance companies making an initial lowball offer in the hopes that the policyholder takes it without knowing any better!
If you believe that you have unfairly been denied a claim, received a lowball offer, or that the insurance company is stalling or engaging in other unfair practices, it is important to contact a qualified attorney. Though you have protections under the law, it is still important that these cases be filed and heard properly, or the insurance company might get away with it on a technicality. Contact us to take advantage of our long experience in securing fair settlements from the insurance companies.