What is Bad Faith Insurance Law?

Evaluating whether or not you have a bad faith insurance case

By Super Lawyers staff | Reviewed by Canaan Suitt, J.D. | Last updated on February 3, 2023

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Insurance policies exist to protect you against economic loss. Your policy often kicks in when you are involved in an accident or suffer some kind of damage or injury. It can also cover you if you caused someone else’s injuries or damages. Unfortunately, sometimes your relationship with your insurer does not work the way it’s designed to. In these cases, you might be able to bring a bad faith lawsuit. The following overview can help you start evaluating whether you have a bad faith insurance case, and it will give you the background information you need to comfortably speak with a bad faith insurance lawyer.

Overview

Every insurance contract contains an implied covenant of good faith and fair dealing, which imposes various duties on insurance companies—for example, the duty to uphold the insurance agreement and indemnify the policyholder. When the insurance company acts in ways that violate this duty of good faith, you can bring a bad faith insurance claim against them. These are tort claims instead of contract claims, which is important because it affects the damages you can recover—it allows you to recover more than the contract is worth.

Common Examples

A bad faith claim happens when your insurance company refuses to follow through with its contractual obligations to you as a policy holder. However, it isn’t always easy to define what bad faith looks like because it is defined by court decisions interpreting state statutes. 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
  • Threats against the insured party
  • Delay in handling insurance claims process
  • Refusal to make a reasonable settlement offer

Proving a Case

Bad faith insurance claims exist under common law and statutory law. Common comes from judicial precedent and is sometimes referred to as “case law.” Statutory law was written and passed by a legislature. The types of claims you can bring under state statutes will vary by jurisdiction. The common law approach will also vary, though it may be more similar from state to state. The upshot is that you may have more than one cause of action against the insurance company. For example, depending on your state law, you might bring a breach of contract claim or a tort claim. In a breach of contract lawsuit, you will argue that the insurance carrier failed to perform their end of the contract—for example, by failing or refusing to provide specified insurance coverage. In a tort action, you will need to show that benefits due under the policy were withheld and that withholding these benefits was unreasonable and resulted in harm to you. To prove your case, you will want to make sure you can demonstrate that you have a valid claim and it was denied. The reasonableness of your insurance company’s actions will be evaluated based on the facts as they existed at the time. In both breach of contract and tort claims, you can be awarded compensatory damages. Damages aim to make you whole for the harm or financial losses you suffered as a result of the other party’s actions. Damages can vary widely depending on the type of claim you bring. In fact, damages is one of the primary things to consider when strategizing about what kind of lawsuit to bring against an insurance company. An experienced lawyer can help you take the most effective legal action.

Common Questions

Below are some common questions you might want to consider when meeting with an attorney for the first time.
  1. What are your attorney’s fees and billing options?
  2. If I win the case, will the other side have to cover the legal fees?
  3. What is a bad faith insurance case?
  4. How do I prove a bad faith insurance case?
  5. What damages are available?
  6. Can I also bring a breach of contract case?

Finding the Right Attorney for Your Needs

It is important to approach the right type of bad faith insurance attorney—someone who can help you through your entire case. To do so, you can visit the Super Lawyers directory, and use the search box to find a lawyer based on your legal issue or location. To help you get started, you may want to consider looking for a lawyer who has experience with bad faith insurance law.

Why Should I Talk to a Lawyer?

Much of this law is state-specific, which means you will want the assistance of someone who knows your state’s law. An experienced lawyer will know what you need to prove and the best way to go about proving it. Your experienced attorney can also obtain necessary documents and interview potential witnesses for you, and they can negotiate a settlement agreement if that’s something you’re interested in. A lawyer will be able to anticipate potential problems with your case and offer legal advice on how to approach them. Your lawyer will also keep track of deadlines and file all the paperwork with the necessary courts and agencies, giving you one less thing to worry about.

What do I do next?

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