Insurance Bad Faith

When can a person sue an insurance company for "bad faith”?

Under South Carolina law, a person who makes a claim against his or her own insurance company may file a lawsuit directly against the insurance company if the company denies the claim in bad faith. Every insurance contract issued in South Carolina contains an implied covenant of good faith between the insured and the insurance company. If the insurance company denies its insured’s claim unreasonably and without factual justification, then the insured may sue the insurance company.

Who is eligible to sue an insurance company for bad faith?

The law of bad faith only applies to first party insurance contracts. In other words, the law of bad faith only applies to claims made by the insured against his or her own insurance company to which he or she is paying a premium for coverage. Thus, it applies to claims made by an insured against their own automobile insurance companies, homeowner’s insurance companies, disability insurance companies, etc. It does not apply to claims made by persons against another person’s insurance company because that other person injured or damaged the claimant in some way.

What amount can a person sue an insurance company for in a bad faith case?

The insured can sue not only for the amount of the claim which was denied, but also for any consequential damages which the insurance company’s bad faith and unreasonable refusal to pay caused to the insured.

Can punitive damages be awarded in a bad faith case?

If the actions of the insurance company in denying the claim were not only unreasonable, but were also done intentionally or with reckless disregard for the rights of the insured under the contract, then the insured may also recover punitive damages from the insurance company.

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