What If An Insurance Agent Commits Theft
When you purchase an insurance policy, you expect honesty and fairness from your insurance company and its representatives. But what happens if an insurance agent commits theft, such as stealing premiums or misusing funds? While this behavior is unethical and often illegal, it doesn’t always fall directly under “bad faith.” Understanding the difference can help policyholders know their rights and options.
What Is Insurance Bad Faith?
Insurance bad faith happens when an insurer fails to act fairly, honestly, or promptly when handling a claim. Common examples include denying a valid claim without reason, delaying payment, or failing to properly investigate a claim.
Bad faith focuses on the insurer’s conduct during the claims process—not necessarily the individual actions of an agent outside that process.
When Theft by an Agent May Be Considered Bad Faith
If an insurance agent’s theft directly harms a policyholder’s claim or coverage, it could potentially fall under bad faith. For example, if an agent intentionally withholds premium payments, alters documents, or manipulates claim information to benefit themselves or the company, this could be considered a bad faith act by the insurer—especially if the insurer fails to correct the wrongdoing.
In these cases, the insurance company may be held responsible for the actions of its agent under the principle of “vicarious liability,” meaning the company can be liable for misconduct committed by someone acting on its behalf.
When It’s Considered Criminal Theft Instead
If an insurance agent steals money directly from a policyholder—for example, pocketing premiums instead of submitting them to the insurer—this is typically considered criminal theft or fraud, not bad faith.
The proper course of action would be to report the theft to law enforcement and the state department of insurance, which regulates insurance practices. Victims can also pursue civil action to recover stolen funds.
Protecting Yourself from Agent Misconduct
To protect yourself, always verify your agent’s credentials. Always request written receipts for payments, and communicate directly with the insurance company to confirm your policy is active.
If you suspect theft or bad faith, document all interactions or communications and seek legal advice as soon as possible. Both insurance bad faith and theft are serious issues—but they require different legal responses to ensure you get justice and compensation.
