What Your Insurance Preferred Contractor Program Can Do When You Face a Bad Faith Lawsuit

November 23, 2022 / By: Stampede Insurance Team
What Your Insurance Preferred Contractor Program Can Do When You Face a Bad Faith Lawsuit

When you're a contractor, you know it's not always easy to stay on top of your game. There are so many things that can go wrong, and sometimes it seems like there's no way to predict what will happen next. This is where you'll need general liability insurance for businesses.

One thing is certain: when you sign up for an insurance-preferred contractor program, providers will be there for you when the unexpected happens. More importantly, general liability insurance for small businesses helps you understand how to deal with it in the best way possible.

If this sounds familiar, you might be asking yourself, what is bad faith? How do I know if I am being sued for bad faith? What should I do if I am being sued for bad faith? And most importantly, how can my insurance company help me fight back?

We will answer these questions and more below.

What is a Bad Faith Insurance Claim?

A bad faith insurance claim is a lawsuit against an insurance company that has wrongfully denied a claim. This can be brought by the insured—the party who paid for and is therefore entitled to receive coverage—or by the insurer, on behalf of the insured.

Bad faith claims are often made when an insurer fails to pay a legitimate claim after an injury or accident. For example, if you were hit by a car while walking down the street and suffered injuries, but your health insurance refuses to cover your medical bills, you would have a bad faith insurance claim against them.

Insurers may also bring bad faith claims against another insurer when they believe their client's coverage has been denied due to illegitimate reasons, such as failing to follow protocol.

What Should I Do If I am Facing a Bad Faith Lawsuit?

A bad faith lawsuit is filed by one party against another party that has failed to perform its obligations under the contract. This can be done in an attempt to have the court intervene on behalf of the plaintiff. Moreover, it can also be done as a means of trying to gain leverage over the defendant.

If you believe the lawsuit is frivolous or malicious, you need to speak with a lawyer conversant with bad-faith insurance law. An attorney will be able to help you determine whether or not the lawsuit has any merit and, if so, how best to proceed with protecting your business interests.

Secondly, check with your insurance company to see if they have any advice on how to handle bad-faith lawsuits. 

If your case does have merit, it is essential to act quickly to avoid having a judgment entered against you. If there is an amount owed by one party or another, then it may be possible for both parties to settle out of court.

However, if no agreement can be reached, it will likely mean going forward with litigation, which can be costly and time-consuming for everyone involved.

What Can an Insurance Preferred Contractor Program Do When You Face a Bad Faith Lawsuit?

Insurance preferred contractor (IPC) programs help contractors and their employees avoid damages and claims of bad faith, which can have devastating effects on your bottom line.

If you’re being sued in court over a claim of bad faith or breach of contract, you may wonder what you can do to protect yourself.

The good news is that an IPC program can help protect your business against claims of bad faith by providing specialized legal support, including:

  • Legal counsel and representation during negotiations.
  • Legal counsel and representation during mediation sessions.
  • Expert advice on how to handle insurance claims to avoid litigation

Increase Your Chances of Avoiding a Bad Faith Lawsuit

Bad faith lawsuits are not only costly and time-consuming, but they can also be devastating. If you have been accused of bad faith, you need to take action to avoid paying thousands of dollars in legal fees or losing your property. 

Here's how to increase your chances of avoiding a bad-faith lawsuit:

  • Provide the best possible service for your clients.
  • Make sure you have a written employment contract for every employee, including all of the terms and conditions you've agreed upon with them.
  • Be prepared to provide documentation upon request that shows that you have kept appropriate records of any interactions with the customer regarding their claim or policy.
  • Ensure you have a standard form for employees to use when filing complaints.
  • Make sure everyone working at your company understands what "bad faith" means so they know what not to do when dealing with employees or customers.
  • Be responsive to clients' requests and questions about their insurance policy or claim and address them honestly and promptly. 
  • Don't promise anything you can't deliver! 

Avoid a Bad Faith Lawsuit

As you can see, the contractor program we offer helps policyholders like you prevent bad faith lawsuits. We want to ensure your business has everything it needs to succeed, which is why we offer our contractor insurance program.

We hope this article has helped understand the importance of being proactive in preventing bad-faith lawsuits and the importance of general liability insurance for small businesses.

If you have any questions or would like to speak with one of our representatives about how we can help protect your business, please contact us at 888-306-7887 at Stampede Insurance Services today!

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