What Is a Bad Faith Claim?
When an insurance company fails to uphold the duties it owes to its policyholders, the insurance company has committed a bad faith act.
Insurance companies owe their policyholders (or “insureds”) important duties by virtue of the insurance contract, including the duty of good faith and fair dealing. For example, when a policyholder files a claim with his or her insurance company, the insurer is required to conduct a reasonable and full investigation into the claim. The insurance company cannot arbitrarily deny the claim, delay payment, or decide to pay less than the full value of benefits owed under the insurance policy.
Unfortunately, these and other bad faith practices have become far too common in the insurance industry. While many insurers are more than happy to accept a policyholder’s premiums, they have been less than willing to pay out the same policyholder’s legitimate claims — even when those claims clearly are covered by the policies they issued.
A common type of scheme in the car sales industry is odometer tampering. Odometer tampering involves rolling the mileage on a car back. A car with fewer miles on it is worth more than one with high mileage and can be sold to a buyer for more money. If a buyer is assured that the bright red roadster has only 15,0000 miles on it she might be willing to pay more for it than if it had 115,000 miles on it. The consumer would not have paid as much for the car or may not have bought the car at all if she had known the true facts. The car buyer has been deceived, she acted on the fraudulent information and she has been damaged by overpaying for the vehicle. She has been defrauded.
The problem of odometer tampering is so significant that the Federal government undertook a study of the issue a few years ago. The study was performed by the NHTSA, which concluded that there are around 240,000 cases of tampering a year in the United States. There are laws at the federal and state level that prohibit odometer tampering.
Often the vehicles that are tampered with are late model cars that have amassed a lot of miles in a short period of time. A three-year-old vehicle with 80,000 might have its mileage rolled back to 30,000 miles and be sold as a low mileage car. The consumer thinks they have found a vehicle that has very little wear and tear on it that will be reliable well into the future. The reality is that the vehicle may be more prone to breakdowns, will need repairs and maintenance soon, and has a lower value than the buyer thought.
A consumer who has been defrauded through odometer tampering can sue the dealership and if the case is proven can collect damages from the wrongdoer.
What is my credit score? It sounds like a pretty simple question, doesn’t it? Most people are only vaguely aware of what their credit score is. The consumer may know she has good credit or maybe not-so-good credit, but few know the actual score. Unscrupulous car dealers can use this lack of knowledge to their benefit. If a potential buyer comes into a dealership and expresses interest in buying a car at some point the buyer’s credit score may be checked. The finance department may say that due to the buyer’s poor credit score the loan can only be made at a higher than typical interest rate.
From the perspective of the buyer higher interest rates on the same loan amount mean that the loan payments will be higher or that the term of the loan will be longer. Higher interest rates cost consumers hard-earned money. Higher interest rates can mean that the dealership and the finance company make more money on the deal. Some dealers may engage in fraud to get you to agree to higher than necessary interest rates.
You may have had some late payments due to personal situations like ill health, divorce, or being laid off. Late payment histories may negatively affect credit scores. On the other hand, the dealer may be misleading you to generate higher payments and extra profit. Information is power, check with the three primary credit-reporting agencies before shopping for a car or any large purchase that will be made on credit. If you know what your score is you will be less likely to be misled by incorrect information from a salesman. The three primary credit reporting agencies are Experian, Equifax, and TransUnion. You may be asked to pay a small fee to get your credit scores.