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Four key steps to avoid a bad faith claim

Bad faith claims are tedious, costly and time-consuming. They can drag on for months or even years after the resolution of the underlying insurance matter. One way to prevent having to defend against a bad faith claim is to avoid them altogether. These four tips will hopefully help your agency do just that.

Keep the lines of communication open – oftentimes, bad faith claims come about because the insured feels ignored or slighted throughout the claims resolution process. Keeping the lines of communication open, and providing regular updates about the status of the matter can go a long way towards staving off these feelings. It is also important to properly document each attempt to contact an insured, whether it be via email, phone or by standard mail.

Avoid claim “bundling”– sometimes there are several different aspects of a claim. For example, an auto insurance claim could have both property damage and personal injury components. In some cases, one portion of the claim is much more straightforward than the other. The insurance company, in an attempt to timely resolve the matter, may be tempted to “bundle” the resolution of these separate matters into a single claim. This strategy, well-intentioned as it may be, can easily backfire, though. The more complicated aspects of a claim always need more attention than straightforward ones.

Investigate, investigate, investigate – thorough investigation is at the heart of every insurance claim. Failure to fully investigate – and document – every aspect of a claim is a key driver of bad faith claims across Louisiana and around the country.

Make sure your insured’s best interests are protected – insurance companies are sometimes stuck between a proverbial rock and a hard place. They, of course, have a duty of good faith dealings with their insured, but they also have a fiduciary duty to shareholders to protect the company’s bottom line. It is key to balance these duties while still keeping the best interests of the insured first and foremost.

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