Home > FAQ > How Do I Know When to File a Bad Faith Claim Against an Insurance Company?
You may have a claim for bad faith when an insurance company deliberately undervalues your claim, wrongfully denies your claim, or engages in a pattern of behavior intended to limit their payout on your claim. Mere claim denial or a lengthy investigation is not, in itself, sufficient to show bad faith. Bad faith requires some affirmative, deliberate conduct by your insurer that is designed to avoid paying the benefits you are owed and which flies in the face of facts, policy language, or public policy.
Types of Bad Faith
Insurance bad faith can manifest in many ways. Insurance companies engage in bad faith behavior whenever they engage in conduct designed to avoid or limit a payout and which serves no legitimate purpose. Bad faith conduct includes, among other behavior:
- Misrepresenting policy language or facts in order to deny or limit a claim
- Unjustifiably delaying investigation of a claim or rendering a decision about a claim
- Delaying payments on a valid claim
- Failing to provide proper, written justification for a claim denial
- Failing to conduct a full investigation before denying a claim
- Threatening litigation in order to cause a claimant to accept a low settlement
- Misrepresenting medical science in order to justify claim denial
- Constantly sending burdensome and unnecessary document requests to a claimant to get them to give up on a claim
While denying a claim, taking a long time to investigate, and stating a willingness to take a claim to court are not in and of themselves wrongful conduct, they may rise to bad faith when they are done with illicit purposes. Bad faith claims require that extra element of insidiousness: denying a claim for the wrong reasons or for no reason at all, delaying an investigation without justification, engaging in bullying or delay tactics designed to get a claimant to drop their case or accept a lowball settlement, deliberately misreading their own policy or ignoring facts in your medical record, or otherwise engaging in behavior that serves no legitimate purpose other than to skirt their obligations.
Do I Have a Legitimate Claim of Bad Faith?
Not every claim denial gives rise to a claim of bad faith. Not even every slow investigation or settlement offer that is lower than expected necessarily means your insurance provider is engaging in bad faith. Even if you have a legitimate reason to appeal a claim denial, your insurance company’s conduct might not be in bad faith.
For a claim to rise to the level of bad faith, the insurer needs to have committed certain deliberate bad acts. Whether they committed those bad acts depends on key documents specific to your claims. First and foremost, the language in your insurance policy will dictate heavily whether a claim denial was legitimate or made in bad faith. Insurance policies are long, bloated documents deliberately intended to be complex to give insurers leeway in deciding upon claims and to keep policyholders in the dark. A bad faith insurance attorney can help you review your policy for the relevant language, including policy exclusions and limitations.
Official statements from your insurer, along with any communications between you and your insurer, are also important in determining whether you have a bad faith claim. Did your insurer provide a thorough written explanation for a claim denial? Is that explanation consistent with the language in the policy and with the facts of your medical condition and treatment? Is it consistent with modern medical science? Has your insurer been responding to your reasonable requests for updates on their investigation of your claim? Have they been ignoring you, taking an exorbitant amount of time to make a decision, or constantly requesting you send them additional documents and evidence that is burdensome for you to obtain and not reasonably necessary for them to render a judgment? Any of these might give rise to a bad faith claim.
Your medical records and the statements made by your physicians might be the strongest evidence in your favor. If your health insurance claim is denied, look to the specifics in your medical records. Look to the statements of your treating physician, including their diagnoses and recommendations. If your physician recommends a course of treatment as necessary, and your insurer denies coverage for that treatment, they may be deliberately ignoring both the facts of your medical condition and the clear recommendations of your physician. Deliberately ignoring recommendations from treating physicians, other medical experts (for example, recommending certain treatments for certain conditions), the specifics of your injury, illness, or condition, or any other relevant facts can give rise to a claim of bad faith.
Don’t Let Insurance Companies Get Away With Bad Faith. Call Gianelli & Morris for Help.
If you are a California insurance policyholder or beneficiary and you have faced a wrongful claim denial or bad faith conduct by an insurance company, call the insurance law attorneys Gianelli & Morris for a free consultation regarding your case.
FAQs
It can be difficult to win a bad faith claim in court without proper representation. Fortunately, when the insurance company knows they're fighting an experienced bad-faith lawyer in settlement negotiations, it may nudge them to agree to a reasonable settlement before reaching court.
What are three ways in which an insurer can be liable for bad faith? ›
Third-party bad faith cases typically fall under three categories:
- Failure to defend. Your insurance company has a duty to provide an adequate defense on your behalf in lawsuit. ...
- Failure to settle. Your provider has a duty to pay for any damages of which you are found liable in lawsuits. ...
- Negligent handling of the case.
Is it hard to win a bad faith claim? ›
It can be difficult to win a bad faith claim in court without proper representation. Fortunately, when the insurance company knows they're fighting an experienced bad-faith lawyer in settlement negotiations, it may nudge them to agree to a reasonable settlement before reaching court.
What is an example of a bad faith claim? ›
Example: A homeowner's insurance company visits a policyholder's home after a fire and concludes a fire occurred, but denies all or part of the valid claim without completely investigating the cause of the fire, or the coverage due the insured under the insurance policy.
How is bad faith determined? ›
Bad faith claims require that extra element of insidiousness: denying a claim for the wrong reasons or for no reason at all, delaying an investigation without justification, engaging in bullying or delay tactics designed to get a claimant to drop their case or accept a lowball settlement, deliberately misreading their ...
What is evidence of bad faith? ›
Depending on the exact setting, bad faith may mean a dishonest belief or purpose, untrustworthy performance of duties, neglect of fair dealing standards, or a fraudulent intent.
Which of the following types of damages are available for bad faith? ›
Types of Compensation You Can Recover for Bad Faith
The law is on your side if an insurance company acts in bad faith. You can seek compensation in the form of contractual damages, extracontractual damages, punitive or exemplary damages, and attorney's fees.
How do you prove a bad faith contract? ›
To establish a case of insurance bad faith, you need to prove the following elements:
- The Existence of a Valid Insurance Contract. ...
- Unreasonable Denial or Delay of Claim. ...
- Failure to Conduct a Proper Investigation. ...
- Breach of Duty of Good Faith and Fair Dealing. ...
- Keep Detailed Records. ...
- Obtain a Copy of Your Policy.
What is bad faith denial of insurance claims? ›
A bad faith insurance claim is a claim you make when an insurer does not behave in a fair and appropriate way in processing a claim. If an insurer engages in bad faith, you may be able to recover compensation for resulting damages you experience.
What is a claim for acting in bad faith? ›
Insurance bad faith is a tort claim that an insured may have against an insurer for its bad acts, e.g. intentionally denying a claim by giving spurious citations of exemptions in the policy to mislead an insured, adjusting the claim in a dishonest manner, failing to quickly process a claim, or other intentional ...
If an insurance company fails to cover a valid claim, it's considered acting in "bad faith."
What is a common cause of action under bad faith? ›
Common Examples
That said, the following are examples of bad faith situations: Failure or refusal to conduct an adequate investigation into legitimate claims. Refusal to defend against claims from other parties. Unreasonable interpretation of the insurance contract.
What are the two types of bad faith? ›
First-party vs Third-party Bad Faith
For example, if you got sick and your health insurance company refuses to cover the medical expenses, it would be a case of First-party Bad Faith. On the other hand, if another party's insurer committed bad faith against you, you should file a third-party claim.
What is an indication of bad faith? ›
intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others.
What if an insurance company makes a mistake? ›
Insurance companies do not like to admit when they make mistakes because it makes them vulnerable to legal liability. You and your attorney might have to take the insurance company to court just to prove they made an error.
What is the insurance company obligated to do? ›
Insurance companies must act in good faith when handling a claim; thoroughly investigate claims; respond to claims promptly; pay or deny claims within a reasonable time; and if denying a claim, provide a written explanation of the reasons for the denial.
What is liable for bad faith? ›
An insurer can be liable for bad faith if the insurer failed to fulfill their obligations of good faith and fair dealing. This means if the insurer acts unfairly in processing or paying a claim, they could potentially be liable for bad faith.
What is 3 third party liability insurance? ›
What is Third-Party Liability Insurance? Third-party liability insurance is a type of policy under which the insurance company offers cover for the insured against legal liabilities that arise due to the loss/damage caused by them to a third person's body or their property.
What is bad faith in the insurance industry? ›
Bad faith insurance refers to an insurer's attempt to renege on its obligations to its clients, either through refusal to pay a policyholder's legitimate claim or investigate and process a policyholder's claim within a reasonable period.