If you’ve ever dealt with an insurance company after an auto accident, you know how frustrating it can be. When insurers deny or delay payments without cause or offer low settlements, it can feel as if they’re ignoring the very purpose of insurance – providing support in times of need.
Unfortunately, many Michigan residents encounter these bad-faith insurance practices. In this blog, we’ll explain everything you need to know about bad-faith tactics in Michigan insurance lawsuits so you will be better prepared to handle potential conflicts with insurers and secure the compensation you’re owed.
What is Bad Faith in Insurance?
There’s more to “bad faith” than an insurance company simply disagreeing over the value of a claim. It involves insurers acting in ways that violate the insurance contract as well as their duty to treat policyholders fairly and reasonably. Although there is not a specific “bad faith” law or cause of action that can be made against insurance carriers, the Michigan no-fault law does provide a mechanism to hold car insurance companies accountable for their bad-faith decisions.
Types of Bad Faith Activity
Below is an overview of bad-faith actions that may give you grounds to file a claim against an insurance provider in a Michigan car accident case.
Unjustified Delays and Denials
When insurance companies delay payments without valid reasons, they’re usually trying to frustrate policyholders. These delays may come disguised as ongoing investigations, repeated requests for documentation, or frequent changes in claim adjusters. For a person recovering from an accident, such delays and lack of fair dealing can be financially devastating.
Payments are Overdue
Personal injury benefits, such as the payment of medical bills and lost wages are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. This means if the insurer has reasonable proof a medical bill or wage loss is related to the crash, they have 30 days to make payment. If they fail to do so, they can be subject to penalty interest and attorney fees.
Misleading Insurance Policy Interpretations
Insurers sometimes interpret policy language in ways that benefit them, even when it contradicts the true meaning of the coverage. They may attempt to claim that damages fall under exclusions that don’t apply or that certain types of losses weren’t covered in your insurance contract when, in fact, they were.
Bad faith in insurance is about more than just poor customer service; it’s a violation of the implied agreement that the insurer will handle legitimate claims fairly. If you notice these types of behavior, it may be time to consider legal action.
Legal Criteria: Michigan’s Bad Faith Laws
Michigan has specific legal standards for proving bad faith in insurance cases. Here, proving a lack of fair dealing requires showing that the insurer’s actions weren’t just a mistake but a breach that involved recklessness or total disregard for your rights as a policyholder.
Breach of Contract vs. Bad Faith
Michigan courts distinguish between a simple breach of contract and bad faith. In most cases, a breach occurs when an insurer fails to uphold the terms of the policy, but bad faith goes beyond this standard. To win a bad faith insurance claim, policyholders must show that the insurer’s actions were reckless or completely ignored their rights. This could involve refusing to settle a legitimate claim, failing to communicate effectively, or denying coverage with no valid justification.
One unique aspect of Michigan law is that the at-fault driver in an accident can bring a bad faith insurance lawsuit against their own insurer if the insurer’s refusal to settle exposes them to personal liability. For instance, if a liability insurer doesn’t settle within policy limits, and the driver ends up with a judgment beyond their coverage, they may pursue a bad faith claim. Here, the bad faith claim actually comes from the defendant – the person at fault – rather than the injured party.
Michigan’s Regulatory Framework
Michigan’s Unfair Trade Practices Act lays out specific standards for how insurers must handle claims, including requirements for timely communication, fair settlements, and transparency with policyholders. Violating these guidelines may make a bad-faith case stronger, but the evidence is still essential. Documentation – emails, letters, phone records, and reports – provides a clear picture of the insurer’s actions and helps support claims that they acted with disregard for policyholders.
Speaking with a Michigan car accident lawyer is key to knowing whether you have grounds for a case. With the right documentation, you can demonstrate that the insurer breached its duty, laying the groundwork for a strong legal claim.
You may be eligible for compensation and, if the insurer’s actions were especially egregious, you could also claim punitive damages, although this doesn’t happen often.
Common Examples of Bad Faith Practices
Understanding specific bad faith practices will help you recognize when an insurer is not upholding its duty. Here are some common red flags to look out for.
Denials Without Justification
Imagine you’ve submitted a valid claim only to receive a denial letter with no clear explanation. Insurers acting in bad faith might simply state that the claim is denied without referencing any part of the policy or explaining why it’s invalid. A legitimate denial of coverage should clearly outline the policy provisions in question, so vague responses are often a warning sign of bad faith.
Offering Unreasonably Low Settlements
When an insurer offers a settlement that doesn’t even come close to covering your costs, it could be a bad faith tactic. They may hope you’ll accept a quick, low payout rather than challenge the offer, especially if you’re dealing with urgent bills or property repairs. Accepting this can leave you financially vulnerable, particularly if additional expenses arise that should have been covered by the insurer.
Excessive Documentation Requests
Insurance companies can rightfully request documentation to support a claim, but bad faith arises when they repeatedly ask for unnecessary or redundant paperwork. This can delay the claim process, wear down policyholders, and discourage them from pursuing their right to benefits. If you feel like you’re being sent in circles, it may be worth speaking to a legal professional to determine if the requests are reasonable.
Poor Communication or Long Delays
Delaying communication, not returning calls, or taking excessive time to respond are tactics used to stall the process. Insurers may ignore updates on your claim status, delay responses to questions, or fail to provide necessary information. Such delays can make it hard for you to move forward, especially when dealing with a time-sensitive issue like car repairs or medical care.
Each of these behaviors violates the insurer’s duty to handle your claim fairly. Recognizing these warning signs can help you act early, gather evidence, and protect your right to fair treatment.
Legal Assistance: When and How to Seek Help
Taking on an insurance company without help can be overwhelming. These companies have the deep pockets and aggressive legal teams to fight claims they don’t want to pay. When you want to pursue policy benefits, knowing when to seek legal advice and finding the right attorney are critical next steps.
When to Consult an Attorney
If you’re dealing with lowball offers, denial without explanation, or excessive demands for documentation, it’s likely time to get legal help. An attorney familiar with Michigan’s bad faith laws will evaluate your situation and explain the next steps. The earlier you consult an attorney, the better your chances of securing a favorable outcome.
Selecting the Right Attorney
Choose an attorney with a background in insurance disputes and specific experience in Michigan’s bad-faith insurance laws. Their expertise will be essential in navigating the complexities of insurance cases, identifying strong evidence, and building a case that stands up to scrutiny.
The Lee Steinberg Law Firm has spent decades standing up to insurers and fighting for Michigan residents who deserve compensatory damages. Our attorneys bring unmatched experience in bad faith cases and know how to approach even the most challenging situations. We don’t just know Michigan’s bad faith laws; we know how to leverage them to secure the best possible result for our clients.
With the Lee Steinberg Law Firm, you’re getting a team that’s not afraid to challenge powerful insurers or hold them accountable. If you’re looking for a law firm with proven results and a reputation for standing by its clients, we are your trusted partner.
Preparing for the Consultation
Bring all claim-related documents, correspondence with your insurer, and policy details to your consultation. By providing a comprehensive view of your case, you give the attorney the information needed to evaluate your claim and determine the best approach.
Understanding Legal Fees
Many attorneys who handle bad faith insurance cases in Michigan work on a contingency fee basis. This means they only get paid if you win or settle, making it possible to pursue a case without incurring upfront costs.
Speak to a Michigan Bad Faith Insurance Lawyer Today
Insurance companies are supposed to offer peace of mind in difficult situations, but bad faith practices can quickly turn a routine claim into a nightmare. Fortunately, Michigan’s laws provide avenues for policyholders to seek justice when insurers don’t uphold their obligations.
By understanding what constitutes bad faith, documenting your experiences, and following the right steps, you can stand up for yourself and demand the maximum compensation you are entitled to.
If you believe you’re facing bad faith practices from your insurer, contact the Lee Steinberg Law Firm today. With decades of experience advocating for Michigan residents, our team has the knowledge and tenacity to take on insurance companies and fight for the compensation you deserve.
Don’t let an insurance company take advantage of you – reach out now to start protecting your rights. To schedule your free initial consultation, please call 313-513-7230 or contact us online today.
