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All policies of insurance have an implied duty that requires the insurance company to act in "good faith" toward its insured. This means that an insurance company cannot simply look for reasons to deny a claim. Rather, the company must thoroughly evaluate the claim and consider all the facts and evidence.
If an insurance company denies a legitimate claim or offers to settle a claim for less than it knows the claim is worth, this can give rise to a bad faith claim against the insurance company. This is a claim that the company has breached its implied duty to act in good faith and deal fairly with its insured. If it is found that the company acted in bad faith, the insured is entitled to all damages resulting from that action. A claim by the insured against the insurance company is called a first party claim.
In the United States, the individual states regulate the insurance companies. There is no federal agency that regulates the insurance industry. In North Carolina, the state agency that oversees insurance companies is called the Department of Insurance.
One of the primary functions of the Department of Insurance is to certify that insurance companies doing business in the state are financially sound. They are required to meet certain financial conditions such that at all times they are able to cover all legitimate claims. The Department of Insurance may take various actions against an insurance company if it is determined that it is failing to conduct its business in a financially sound manner.
Many states have laws regulating the behavior of insurance companies to ensure fairness in the way companies handle applicants for insurance and policyholders. One of the functions of a Department of Insurance is to police "unfair trade practices" and "unfair claims practices." This means investigating consumer complaints and taking action, when appropriate, to get companies to stop conduct that violates the laws and impose penalties for those violations. Other duties of a Department of Insurance include approving the policy forms used by insurance companies and authorizing rates charged for various types of insurance.
There are various reasons why an insurance company may deny a claim. For example, the insurance company may determine that the loss is not a type that is "covered" by the terms of the contract of insurance. The company may find that the person who suffered the loss is not an "insured." Because of the intricacy of insurance policies, it is strongly advised that you seek the assistance of an attorney experienced in the handling of insurance coverage matters to ensure a careful analysis of your situation and how the law applies to it.
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