When Insurance Companies Fail to Provide Protection to Policyholders


September 06, 2012

When you are involved in a motor vehicle accident or your home suffers substantial wind or storm damage, you reasonably assume that your auto insurance or homeowner’s insurance will provide the protection from loss for which you paid premiums. Insurance companies owe an obligation of good faith and fair dealing, which is an implied condition within every insurance contract in Georgia.

This means that insurers are expected to handle the claims of policyholders fairly and give as much consideration to the interest of its insured as its own best interest. Insurance companies historically operated as semi-public trusts because of the important role they play in protecting consumers from devastating loss.

However, an argument can be made that, in general, the insurance industry has drastically evolved from a service oriented industry to an industry driven by maximizing profits, and profits are increased unquestionably to the extent that a company successfully denies its policyholders the benefits for which they paid premiums. A big shift occurred during the 1990s when computer programs designed to minimize the valuation of insurance claims replaced valuations by human insurance adjusters. Many people find that the software programs are based on unrealistic assumptions and cost estimates, as they produce radically undervalued calculations of the value of claims.

Insurance companies use these computer projections to develop "low-ball offers." If you submit a claim for property damage to your home, for example, the insurance carrier may pay quickly if the low-ball offer is accepted but drag the process out as long as possible if it is not accepted. This strategy also escalated the time and cost involved in settling claims so that it is harder for policyholders to economically obtain legal representation to file smaller insurance claims. Reportedly, Allstate Insurance was the first insurance provider to adopt this software profit maximizing approach which was referred to as the “Good Hands or Boxing Gloves” approach to handling insurance claims. This approach permitted Allstate to increase its earnings to $4.6 billion in 2007, which represented an increase of a hundred percent over its earnings during the 1990s.

The success of Allstate in adopting this computer driven model resulted in most insurance companies shifting to this business model, which is bad news for insurance policyholders. The insurance companies that account for seventy percent of all insurance industry profits are believed to abuse their obligations to policyholders according to one industry expert. Because of the enormous financial pressure imposed by a tough economy, insurance companies are able to impose enormous financial pressure on policyholders by delaying paying their claims. A Harris interactive poll revealed that as many as 16 percent of policyholders that suffered property damage to their home experienced financial hardship while waiting for their claim to be paid.

Insurance companies also use other strategies to create delays and put financial pressure on policyholders. When a policyholder files a fire claim, for example, the insurance carrier may conduct an arson investigation simply to stall and delay. The insurance carrier may also try to intimidate a customer who makes a theft or fire claim by threatening to pursue a criminal case for insurance fraud. These unfair and unethical practices are far too common and frequently lead to policyholders being strong-armed into settlements substantially below the fair market value of their claim.

At the Atlanta insurance bad faith law firm of Montlick and Associates, our experienced legal team is familiar with the unethical tactics used by insurance companies to frustrate or underpay claims. Our tenacious Atlanta insurance bad faith lawyers work diligently to compel insurance companies to provide the promised benefits to their clients. If your insurance company unfairly denies, delays or undervalues your claim, we may be able to pursue an insurance bad faith lawsuit, which can in certain circumstances permit the court to not only award what you are entitled to under your policy but also punitive damages against your insurance company.

Our Georgia insurance bad faith attorneys are available to assist clients throughout all of Georgia and the Southeast, including but not limited to Albany, Athens, Atlanta, Augusta, Columbus, Gainesville, Macon, Marietta, Rome, Roswell, Savannah, Smyrna, Valdosta, Warner Robins and all smaller cities and rural areas in the state. No matter where you are located our attorneys are just a phone call away, and we will even come to you. Call us 24 hours a day/7 days a week for your Free Consultation at 1-800-LAW-NEED (1-800-529-6333). You can also visit us online at www.montlick.com and use our Free Case Evaluation Form or 24-hour Live Online Chat.

Category: Personal Injury

Please Note:
Many of our blog articles discuss the law. All information provided about the law is very general in nature and should not be relied upon as legal advice. Every situation is different, and should be analyzed by a lawyer who can provide individualized advice based on the facts involved in your unique situation, and a consideration of all of the nuances of the statutes and case law that apply at the time.