If an insurance company denies a valid insurance claim, the insured may decide to pursue a case for bad faith against the insurance company. If the insured prevails, the damages can be significant.
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Bad Faith Insurance Elements
In Nevada, when an insurance company is in contract with an insured individual or business, it has the duty to act in good faith toward its clients. Nevada law protects insurance holders from the bad faith acts of insurance companies. If an insurance company denies a valid claim, a personal injury attorney may decide to pursue a bad faith insurance claim on behalf of the insured.
To prove the claim, the personal injury lawyer must establish the following:
- The plaintiff has an insurance contract with the defendant
- The plaintiff filed a claim with the insurer and it was a type that was covered under the policy
- The insurance company acted unreasonably
- The insurance company knew it had acted unreasonably
- The insurance company did not have a reasonable basis to deny the claim
- The plaintiff suffered damages because the insurance company did not pay the claim or delayed in paying the claim
There are a number of ways that an insurance company may engage in bad faith practices. For example, the insurance company may try to pay an inadequate amount of compensation after accepting the claim, delay payment, make an unreasonable interpretation of policy language or fail to thoroughly investigate a claim promptly.
The plaintiff who prevails in a bad faith insurance claim may be able to recover from actual losses that he or she suffered because of the denial. Actual losses are often the reasonable value of the claim that was not covered or the difference between the amount paid and the true value of the claim, as well as extra-contractual damages like out-of-pocket expenses that the insured incurred as a result of the insurer’s bad faith acts.
Nevada’s bad faith insurance law allows for punitive damages to be awarded against an insurance company. These damages are intended to punish the insurance company for acting in bad faith and to deter future similar behavior. These damages often exceed the amount of actual damages. Nevada law ordinarily imposes a cap on punitive damages of up to three times the amount of actual losses. However, the law specifically excludes bad faith insurance claims from this cap.