Insurance Law | Auto Insurance | Disability Insurance | Bad Faith
Insurance
Law
While types of insurance vary widely, their primary goal is
to allocate the risks of a loss from the individual to a great
number of people. Each individual pays a "premium" into a pool,
from which losses are paid out. Regardless of whether the particular
individual suffers the loss or not the premium is not returnable.
Thus, when a building burns down, the loss is spread to the people
contributing to the pool. In general, insurance companies are
the safekeepers of the premiums. Because of its importance in
maintaining economic stability, the government and the courts
use a heavy hand in ensuring these companies are regulated and
fair to the consumer.
In the absence of insurance, three possible individuals bear
the burden of an economic loss; the individual suffering the
loss; the individual causing the loss via negligence or unlawful
conduct; or lastly, a particular party who has been allocated
the burden by the legislature, such as employers under Workmen's
Compensation statutes.
Auto Insurance
Part of what auto insurance
does is to pay for the repair or replacement of a vehicle which
is damaged either as a result of your driving or from other causes
not related to driving, such as theft or storm damage.
Auto insurance also covers your legal liability which could arise if you injure
another person or damage another person's property with your vehicle. Depending
on the extent of the damage or injury caused, the potential amount for which
you could become liable is far in excess of the value of your automobile, perhaps
in the hundreds of thousands of dollars or more. Auto liability insurance pays
the damage for which you become liable, up to the dollar amount of liability
coverage that you purchased. Without auto liability insurance, all of your personal
assets could be at risk.
If you are sued based on operation of your vehicle, auto insurance also pays
for the cost of your defense. Defending a lawsuit in court can be very expensive,
even if ultimately you are found not to be legally responsible for any damages.
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Disability Insurance
Disability Insurance is income paid weekly or monthly
when an individual is unable to work as a result of sickness
or injury. The pay out provided may be stated as a percentage
of income or as a set dollar amount. The policy defines how much
you will be paid, how soon after you are disabled payments appear
in your mailbox, and when they will cease. Benefits periods may
depend on whether the disability was caused by an accident or
illness. The longer the benefit period, the higher the premium
will be.
There many different kinds of disability contracts. Some plans are available
from your employer through its group health package and from private insurers.
There are also various public sector programs including Social Security and some
State Disability Insurance programs. Veterans, members of the armed forces, federal
civil servants and coal miners are also covered by federally-sponsored programs.
Bad Faith
All insurance policies contain an implied obligation
applicable to the insurance company of "good faith and fair dealing" towards
its insured. When a claim is presented, this implied obligation
means that an insurance company cannot simply look for reasons
not to pay; the company must make a thorough investigation
of the claim, must consider all reasons and circumstances that
might support the claim, and must give as much consideration
to the financial interest of the insured as it gives to its own
financial interest.
If an insurance company refuses to pay a claim that should be
paid or offers to settle a claim for less than it knows the claim
is worth or denies a claim without adequate investigation, this
could give rise to a bad
faith claim against the insurance company. If the company
is found to have acted in bad faith, the insured is
entitled to all damages resulting from that action, including certain types of
damages that would not be available just for breach of contract. In cases of
extreme or outrageous misconduct by an insurance company, the insured also may
be entitled to receive punitive damages.
