In this article, we discuss bad faith claims and how they work in Iowa. We cover questions including:
- What is a bad faith claim?
- How can I tell if I might have a Bad Faith Claim?
- How do I make a Bad Faith Claim?
What is a bad faith claim?
Few people want to deal with making an insurance claim, but sometimes it is necessary. Storms, accidents, fires, and health scares happen leaving you in need of the help of your insurance company to pay out a claim. In Iowa, an insurance company owes its insureds a duty of good faith and fair dealing. Should the insurer breach this duty, they may be determined to be acting in “bad faith,” exposing them to liability for damages including costs above and beyond the fees to compensate you for your insurance claim.
Iowa law has recognized the claim for first party bad faith since 1988. See Dolan v. Aid Ins. Co., 431 N.W.2d 790 (Iowa 1988). Under Iowa law, a claimant must prove by substantial evidence that there is no reasonable basis for denying or delaying your benefits and the insurance carrier knew or should have known that its refusal or delay was without a reasonable basis.
To meet the first element, that there is no reasonable basis for denying or delaying your claim, a number of factors must be considered. If your claim coverage is debatable, in other words, if there is a rational basis for denying coverage, the element will not be met. Even if the insurance carrier’s position ultimately lacks merit, if they have a rational basis for their position, you won’t be able to make a bad faith claim. The insurance carrier has to deny or delay the payment of the claim without any basis for this element to be met. This can come in the form of the carrier denying the claim without allowing you to submit any claim information, initially accepting the claim but never following up on valuation or payment of the claim, or your carrier creating seemingly new rules above and beyond your policy terms to justify denying your claim.
For the second element to be met, that the insurance carrier knew or should have known that its refusal or delay was without reasonable basis, we must follow more of a subjective analysis. The insurance company must have known or should have known that the basis for denying their claim was unreasonable. Merely lacking a reasonable basis for denying the claim doesn’t necessarily meet this element. If the claim was clear, within the policy coverage, yet insurance still denied or delayed paying out the claim, the element should be met.
How can I tell if I might have a Bad Faith Claim?
It can be difficult to determine yourself what constitutes bad faith and if you might have a bad faith claim. However, if one of the following things happens, you might need to further inquire about bringing a bad faith claim:
- Your insurance carrier has denied your claim despite its clear validity;
- Your insurance carrier has significantly delayed paying your claim after the claim was validated;
- Your insurance carrier is using policy language technicalities to limit or otherwise deny your claim;
- Your insurance carrier fails to investigate or examine your claim despite it being covered under your policy;
- Your insurance carrier underestimates your claim significantly, attempting to pay out less than the costs to compensate you for your losses.
How do I make a Bad Faith Claim?
The easiest way to bring a bad faith claim is to bring it with the underlying claim against your insurer that has either been delayed or denied. It is important to consult with an attorney to help you through this process and determining whether you should bring a bad faith claim in addition to your underlying claim. Should a bad faith claim be made, you may be entitled not only to compensation for your claim, but additional damages due to the insurance carrier’s failure to act in good faith with your claim.
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