After filing a commercial insurance claim, a significant delay can disrupt the company’s operations. If the property has been damaged, it may be unusable, or operations may proceed at a substandard rate. As a result, the company is actively losing money until those repairs are made.
As a general rule, insurance companies need to take certain steps to respond to claims in a prompt and reasonable manner. They need to acknowledge the claim within 15 days, for example. If the company submits the claim and does not hear back from the insurance company for weeks or even months on end, it creates an unreasonable delay. This is an example of a bad faith insurance tactic.
Why does this happen?
There are certainly situations in which it is just a communication issue. Perhaps there is miscommunication within the insurance company itself, and the belief is that the claim has been addressed when no steps have actually been taken.
But the reason that unreasonable delays are prohibited is that insurance companies should not intentionally use them to try to get around payouts. If the company delays the process, for example, they may believe that an eventual lowball offer is more likely to be accepted, even though it is not fair and does not address the full costs that relate to the claim. It puts pressure on the commercial entity to take what they can get because the delays are causing them active financial issues.
This type of tactic would be unfair and in violation of both state law and the contractual agreement between the insurance company and the commercial entity. However, these types of bad faith insurance tactics do occur from time to time, and it is important for those involved to understand exactly what legal steps they can take.