Malfeasance in Insurance: Understanding Wrongdoing & Misconduct
Examples of Malfeasance in Insurance
Some examples of malfeasance in the insurance industry include:
Fraud – Providing false or misleading information to policyholders about coverage, intentionally denying valid claims, overcharging customers, etc.
Breach of contract – Violating the terms of an insurance policy by not providing agreed-upon coverage
Misconduct – Engaging in unethical business practices like “churning” policies or deceptive sales tactics
Violating laws and regulations that govern insurance company conduct
Any of these actions would be considered malfeasance since they involve wrongdoing, violation of duty, and causing harm through deception or unethical behavior. The misconduct is intentional and demonstrates a blatant disregard for the interests of policyholders.
What Makes Malfeasance Different than Other Insurance Violations?
Not all insurance company violations rise to the level of malfeasance. What distinguishes malfeasance is the element of intent and the severity of the breach of duty:
Negligence refers to careless mistakes and oversights rather than intentional wrongdoing.
Breach of contract involves failure to adhere to the policy terms but may be due to a misunderstanding rather than ill intent.
Whereas fraud aims to achieve financial gain illegally, malfeasance focuses on the violation of trust that undermines the integrity of the insurance industry.
The harm caused by malfeasance also tends to be more severe since vulnerable policyholders are taken advantage of and denied the protection they counted on and paid for. Insurance regulators and plaintiff’s attorneys take accusations of malfeasance very seriously given breached trust involved. Companies found guilty can face hefty fines, damaged reputations, and even criminal charges for company executives depending on the offense.
Spotting Warning Signs of Malfeasance
Policyholders should be alert for any signals that an insurer is putting profits over promises by:
- Rescinding policies on minor technical grounds
- Delaying claim investigations unreasonably
- Routinely denying claims for suspicious reasons
- Misrepresenting policy terms
If you suspect bad faith or malfeasance, document all interactions carefully and consider contacting your state insurance department to report what could be unlawful practices. Don’t hesitate to consult an attorney who specializes in insurance matters as well. You pay insurance premiums expecting ethical treatment and fair claims handling. Insurers who fail to uphold their duty face serious penalties in today’s regulatory environment.