As a policyholder who has experienced a loss, you might think it goes without saying that an insurance company must tell you all the coverages in place under your policy that might apply to your claim. While insurance companies often do so, it is certainly not unheard of for an applicable coverage to be “overlooked.” You might be surprised that sometimes a policyholder’s coverage under a policy is not disclosed, leading to a policyholder being harmed by not receiving all the policy benefits they paid premium for. A bad faith case might ensue.
There is a statute in Oklahoma called the Unfair Claims Settlement Practices Act which outlines actions by an insurance company which are considered to be unfair to policyholders. That law states it is an “unfair claim settlement practice” for an insurance company to fail to “fully disclose to first party claimants, benefits, coverages, or other provisions of any insurance policy or insurance contract when the benefits, coverages or other provisions are pertinent to a claim.”
Insurance companies know better than the vast majority of their policyholders what coverages the policyholder’s insurance policy contains. This is especially true with regard to coverages that are lesser known among the public.
For instance, if a policyholder is involved in a motor vehicle accident it is common for a layperson not to understand how and when uninsured/underinsured motorist (“UM”) coverage applies. Sometimes the policyholder doesn’t even realize they have paid for UM coverage. Many people think that only if the other party in the accident has no coverage whatsoever does UM coverage kick in. This isn’t true. If the other party involved in an automobile accident has coverage, but not enough to compensate the policyholder for her damages, UM coverage kicks in. Insurance adjusters know this fact very well. If a policyholder is involved in an accident and UM coverage even might apply, the adjuster must disclose that coverage to the policyholder. Sometimes this does not happen.
Another example is when a policyholder suffers a homeowners insurance loss and needs move out of his home for a time until it can be repaired. Most homeowners insurance policies contain what is called “Additional Living Expense” or “ALE” coverage. Under this coverage, the insurance company will pay for lodging (a hotel room, an apartment, even to lease a house under certain circumstances) for the policyholder and his family while the repairs are done. It sometimes happens that an insurance adjuster (who knows good and well that ALE coverage exists under the policy) will simply not mention it to the policyholder, which leaves the policyholder to either come out of pocket for expenses that should be covered under the policy or, if that is not an option for them, to live in a house that is not fit to be inhabited.
Insurance adjusters have tools at their disposal (including the powerful computer systems of the insurance companies they work for) to quickly and easily identify all coverages available to a policyholder that are potentially applicable to a claim. In order to meet the duty of good faith and fair dealing and avoid violating the Unfair Claims Settlement Practices Act, they must err on the side of informing the policyholder of all the coverages the policyholder may be able to take advantage of in a claim. This is only fair seeing is how the company understands how the policy works better than the policyholder and the policyholder has paid their hard-earned dollars in premium for every coverage the policy allows.