An Example Of An Unfair Claims Settlement Practice Is

An Example of an Unfair Claims Settlement Practice: The Deliberate Delay

One of the most pervasive and damaging unfair claims settlement practices employed by some insurance companies is the deliberate and unreasonable delay in processing a valid claim. This isn't merely about the normal, sometimes lengthy, investigation period that complex claims require. It is a calculated strategy to frustrate policyholders, wear down their resolve, and ultimately pay out less than what is owed, or hope the claimant abandons the claim altogether. This practice strikes at the heart of the insurance contract’s fundamental promise: timely assistance when a covered loss occurs.

The Practice in Action: How Delays Are Engineered

Insurance companies may employ a variety of tactics to manufacture delay, often skirting the line of legality or outright violating state regulations designed to prevent such conduct. Common methods include:

• Repeated, Unnecessary Requests for Information: An adjuster may continuously request the same documentation already submitted, ask for marginally relevant or impossible-to-obtain records, or fail to specify exactly what is needed, forcing the claimant into a bureaucratic loop.
• Shifting Adjusters and Lost Files: The claim is passed from one adjuster to another, each requiring the policyholder to restate their case. Files mysteriously get "lost" or misplaced in transfer, requiring the claimant to start the process anew.
• Superficial or Incomplete Investigations: The insurer conducts a perfunctory inspection, misses critical evidence of damage, or fails to interview key witnesses, then uses this incomplete investigation as a reason to stall a decision.
• Unreasonable "Additional" Investigation: After initially accepting liability, the insurer may suddenly reopen the investigation based on flimsy pretexts, such as an anonymous tip or a cursory review by an in-house "special investigations unit" (SIU) that lacks substantive new evidence.
• Ignoring Communications: Phone calls and emails from the claimant or their contractor go unanswered for weeks or months. Correspondence is acknowledged but no substantive action is taken, creating a black hole of communication.

Why This Is Inherently Unfair and Often Illegal

The unfair claims settlement practice of deliberate delay is not just poor customer service; it is a breach of the insurer’s duty of good faith and fair dealing. Most states have adopted models based on the National Association of Insurance Commissioners (NAIC) Unfair Claims Settlement Practices Act, which explicitly prohibits:

• Failing to acknowledge and act promptly upon communications with respect to claims.
• Failing to adopt and implement reasonable standards for the prompt investigation and settlement of claims.
• Not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims where liability has become reasonably clear.
• Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such litigation.

The unfairness lies in the power imbalance. The insurance company controls the purse strings and the claims process. The policyholder, often suffering financial loss and emotional distress from the event itself (a fire, accident, or natural disaster), is left in a state of limbo—unable to repair their home, replace their vehicle, or cover medical bills while waiting for a resolution. This financial and psychological pressure can coerce a claimant into accepting a lowball settlement simply to end the uncertainty.

The Real-World Impact on Claimants

The consequences of this tactic extend far beyond mere inconvenience. Consider a family displaced by a house fire. Their insurer delays the claim for months. They live in a hotel, exhausting savings, while the insurer requests the same receipts for the third time. The children’s school is disrupted. The stress exacerbates the trauma of the loss. This is the human cost of a deliberate delay. For a business owner, a delayed claim for property damage or business interruption can mean missed payroll, lost customers, and ultimately, bankruptcy. The insurer’s stalling doesn’t just postpone a payment; it actively deepens the initial loss.

Recognizing the Red Flags of a Deliberate Delay

Policyholders should be aware of warning signs that a delay is strategic rather than procedural:

1. Vague Timelines: You are given promises like "we’ll get back to you next week" that consistently pass without contact.
2. Changing Stories: The reason for the delay shifts—first it’s "waiting on a third-party report," then it’s "need more photos," then it’s "review by a supervisor."
3. Lowball Offers Followed by Silence: After an initial unreasonably low settlement offer is rejected, the insurer goes silent, hoping you’ll cave.
4. "We Need More Time" Without Explanation: The adjuster cannot articulate what specific, legitimate investigation remains outstanding.
5. Pressure to Accept a Quick, Inadequate Settlement: Conversely, after a long delay, an insurer may rush you to accept a final offer, exploiting your desperation.

How to Combat This Unfair Practice

If you suspect your claim is being deliberately delayed, taking organized, persistent action is crucial:

• Document Everything: Keep a detailed log of every phone call (date, time, person spoken to, summary), email, and letter sent or received. Note promises made.
• Communicate in Writing: Follow up phone calls with an email summarizing the conversation. This creates a paper trail. Send formal letters via certified mail, return receipt requested, for critical requests or complaints.
• Know Your Policy and State Law: Review your insurance policy’s sections on claims

processing, time limits, and your duties after a loss. Familiarize yourself with your state’s insurance regulations, which often specify deadlines for insurer responses.

• Be Persistent, Not Passive: Don’t let "We’ll get back to you" be the end of the conversation. Call back if you don’t hear by the promised date. Escalate to a supervisor if necessary.
• File a Complaint with Your State’s Insurance Department: Most states have a dedicated department to handle consumer complaints against insurers. Filing a complaint can prompt an investigation and pressure the insurer to act.
• Consider Legal Counsel: If the delay is egregious and your losses are mounting, consult with an attorney specializing in insurance bad faith. They can advise on your rights and the viability of a legal claim.
• Request a Written Explanation: If an insurer claims they need more time, ask for a specific, written explanation of what is still needed and a firm deadline for a response.

The goal of these tactics is not just to delay a payment, but to break the claimant’s resolve. By being informed, organized, and assertive, you can push back against this strategy and force the insurer to fulfill its contractual and legal obligations in a timely manner.

Conclusion: The Fight for Fairness in the Claims Process

The insurance industry’s practice of deliberate delay is a calculated business strategy that exploits the vulnerability of policyholders at their most desperate moments. It is a tactic that prioritizes corporate profit over the fundamental purpose of insurance: to provide financial security and peace of mind in times of loss. While insurers have a right to investigate claims thoroughly, they do not have the right to use procedural steps as weapons of attrition.

For the system to work as intended, there must be a balance of power. Policyholders must understand their rights, recognize the signs of bad faith, and be willing to advocate for themselves. Regulators must enforce existing laws with vigor, and the legal system must provide a real deterrent for companies that view delay as a profit center. Until then, the fight against the silent stall is a fight for the very integrity of the insurance contract—a fight to ensure that when disaster strikes, the promise of protection is not met with a wall of silence.