What Is “Bad Faith” on the Part of an Insurer?
When you purchase insurance, you expect your insurer to act in good faith. That is, you expect the insurer to handle your claim honestly, promptly, and fairly. Unfortunately, this doesn’t always happen. When an insurance company unreasonably delays, denies, or mishandles a valid claim, it may be acting in bad faith. But what does “bad faith” really mean in the insurance context? Let’s take a look.
Understanding the Duty of Good Faith and Fair Dealing
All insurance contracts carry an implied duty of good faith and fair dealing. This means the insurer must treat the policyholder’s interests with equal consideration to its own.
When an insurer breaches this duty, it can open the door to a bad faith insurance claim.
Examples of Bad Faith Insurance Practices
While not every denial or dispute qualifies as bad faith, some red flags include:
- Unreasonable denial of benefits – Denying a claim without a valid reason or explanation.
- Failure to investigate – Ignoring evidence, not conducting a proper investigation, or failing to interview witnesses.
- Delaying payment – Unnecessarily stalling the claims process or using red tape to delay paying out.
- Lowballing a settlement – Offering far less than what the claim is worth, hoping the policyholder won’t challenge it.
- Misrepresenting the policy: Providing incorrect or misleading information about what is covered.
- Retaliation – Punishing a policyholder for making a claim by canceling coverage or increasing premiums unfairly.
Legal Remedies for Bad Faith
If you suspect your insurer is acting in bad faith, you may have legal options beyond the original claim value. A successful bad faith lawsuit can lead to:
- Compensatory damages (to cover losses caused by the insurer’s conduct),
- Emotional distress damages, and
- Punitive damages (to punish especially egregious behavior).
In some states, policyholders may also recover attorney’s fees and interest on delayed payments.
What to Do If You Suspect Bad Faith
If you believe your insurance company is acting in bad faith, please take the following steps:
- Document everything — Save all communications, denial letters, and notes from phone calls.
- Request a clear explanation — Ask the insurer to explain the reason for the denial or delay in writing.
- Consult an attorney — A lawyer experienced in insurance law can evaluate your situation and advise you on whether you have a bad faith claim.
Contact Justice Through Compensation for Help
If you or a loved one was injured in an accident, please know that the law firm of Justice Through Compensation is here to help. Our legal team is skilled, experienced, and passionate in their representation. Let us shoulder the burden of an injury claim or lawsuit while you focus on healing from your injuries. Contact us today for the quality legal help you deserve.
* Main image at top by freepik