"FBIC Bad Faith Insurance FAQ"

"FBIC Bad Faith Insurance FAQ": "Why do Insurers commit bad faith?

There is a very substantial benefit and good economical reason for Insurers to commit bad faith. Insurers receive thousands of claims every day many of which are wrongfully denied. Very few Insureds dispute this wrongful denial and thus Insurers save considerable amounts of money which in reality they would otherwise be obligated to pay. Here's an example how it works. Let's say for example that an Insurer denies 100 claims. Of these 100 claims, ninety-five go unchallenged and disappear while five claims are disputed. Of these five, the Insurer reverses its earlier decision to deny coverage and agrees to pay on four of the claims but continues to refuse coverage on the fifth claim. The fifth claimant then files a lawsuit and recovers bad faith and punitive damages against the Insurer. Even if this claimant who filed suit recovers millions of dollars against the Insurer, the insurance company still saved millions of dollars by not having had to pay the other 95 claims which were denied and not disputed. Thus, Insurers gain substantial financial and economic advantage by continuing to deny claims."