Page 24 - Book1

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XI

Insurance Fraud

Fraud
Although insurance fraud is commonly associated with fraud committed
by people who swindle money from insurance companies, it may also be
committed by the insurance companies themselves. Also known as "bad faith
insurance practices," fraudulent activities on the part of insurers include
actions such as denying valid insurance claims, denying coverage to
individuals for certain conditions that should be covered, failing to properly
investigate claims, and deliberately underpaying claims. Some states have
statutes passed by legislators that specifically prohibit these practices on the
part of insurers. In other states, however, bad faith insurance practices are
largely governed by court-made law.
Both statutory and court-made laws prohibiting bad faith insurance
practices are based upon the rationale that in every insurance contract, there
is an implied promise between the parties to treat each other fairly and act in
good faith. Because contacts have the binding power of law, an insurance
company's bad faith action to deny a policyholder the benefit of the contract is
a violation of the contract and therefore illegal.
All states have departments of insurance which, among their other
duties, investigate bad faith and fraudulent practices committed by insurance
companies. Many states aggressively investigate and punish insurance
companies who commit these actions. For example, in 2000, New York state
fined an insurance company $500,000 for deleting thousands of valid claims
and deliberately underpaying certain types of claims. In 2008, an Oregon
woman's report to the state that her insurer had improperly denied her claims
led to an investigation revealing that the insurance company had denied over
5,000 similar claims. The insurer was heavily fined.
In some cases, state departments of insurance will choose not to
investigate certain allegations of bad faith, or, even if they do investigate, may
not take action against the insurer. In such instances, individuals who believe
they have been subject to bad faith or fraudulent practices must file lawsuits in
order to enforce their rights under their insurance contracts.

Hiring a public adjuster

Public insurance adjusters are the only property loss professionals who
work on behalf of policyholders. Individuals and businesses hire public
insurance adjusters when they need assistance initially ​filing a claim​ or feel a
claim amount offered by an insurance company is incorrect. Claims for ​flood​,
fire, smoke, wind and hurricane damage, as well damage due to other perils,
can be filed and negotiated by public adjusters. Property losses might also
result in other types of losses, such as business income, which public
adjusters can evaluate.

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