What is a Bad Faith Insurance Claim?

When it comes to settling your insurance claim, the insurer is in the driver's seat. The policyholder lacks the industry knowledge, financial resources, and the insurer's weight in negotiations.

In recognition of insurance claims controlled by large insurers, courts in the United States will find an obligation of fair dealing and good faith in all insurance policies. If your insurer fails to meet their commitment to you with a reasonable investigation and processing of your claim, you have the right to file suit against the insurer.

Also known as "bad faith," the consumer has protection against insurers giving them the shaft. State law defines the extent of bad faith in the context of insurance policies. Your claim may continue under the common law rules set by the courts or by violations of state statutes regarding bad faith insurance claims.

Let's take a deep dive to understand the legal ramifications involving a bad faith insurance claim.

The Components of Bad Faith Common Law

The common law differs in its definition of bad faith from state to state. Most states define bad faith as unreasonable conduct without any proper causation. Other states may take a narrower view on bad faith. They may only find liability with the insurer if the rejected claim isn't fairly debatable, with the insurer realizing this is the case.

Some states view bad faith as a breach of contract or a tort, adding more confusion to the matter. Under the common law torts regulations, insurers owe their policyholders fair dealing and good faith because of the relationship between the parties.

If you have to prove common law bad faith to the courts, you'll need to focus on the following two aspects of your case.


#1 The Insurer Withholds the Benefits Stipulated in Your Insurance Policy

If you can prove you have a valid claim that meets the terms of your policy agreement with the insurer, and you have the rejection document from your insurer, you can file suit against the insurer for bad faith, provided you meet the second requirement.

#2 The Insurer Withholds Benefits Unreasonably

The court will decide whether the insurer acted in a reasonable manner when processing and paying out the claim. The court looks at the circumstances and the facts involving the case at the time of the rejection decision from the insurer.

Some states have different opinions than others regarding liability for the claim. For example, Wisconsin only views liability on the insurer's behalf if they intentionally throw out a claim without taking reasonable action to investigate before issuing the rejection.

Relying on the insurer's negligence alone is not enough to prove to the court that you have a case of bad faith with your insurer. However, the courts do recognize some behavior from the insurer as poor conduct.

Look through this list of factors influencing the court's decision of bad faith. While none of them offer evidence of bad faith, the court does weigh them into account when assessing your case.

  • • Misrepresentation of policy provisions or facts relevant to your claim.
  • • The insurer fails to acknowledge your claim or process it timeously.
  • • The insurer fails to implement and adopt reasonable investigation and processing of your claim.
  • • The insurer fails to deny or approve a claim within a reasonable time limit after the insured files.
  • • The insurer fails to provide the insured with a reasonable reason for rejecting the claim.

Components of a Statutory Bad Faith Claim

If you decide to file suit against your insurer at the advice of an attorney, the lawsuit can allege both a statutory bad faith claim and a common law bad faith claim. The states legislature determines the

The laws implemented by a state's legislature form the basis for your claim. Most states have legislation in place to prevent deceptive practices by insurers. These statutes detail the kinds of actions prohibited by the courts and the recourse available to the insured.

For example, Connecticut allows the insured to file a separate claim for violating the Unfair Insurer Practices Act. If you're a policyholder in Connecticut, you have the following legal recourse available to you, allowing you to allege any of the following misconduct from your insurer.

  • • Compelling the policyholder into a legal battle to recover their funds.
  • • Failing to provide a reasonable explanation for the rejection of a claim.
  • • Failing to provide the full settlement amount as stipulated by the policy.
  • • Failing to make prompt settlement when there is a clear case of liability with the insurer.
  • • The insurer rejects the claim without a reasonable investigation.
  • • Failing to implement appropriate investigation standards.

Experiencing Bad Faith with Your Insurer? Consult with Florida Public Adjusters

If you're experiencing bad faith from an insurer, don't call a lawyer; call Florida Public Adjusters. We work for you, not the insurance company, and we'll do everything we can to get the insurer to pay your claim.

United Claim Clinic Mission Statement

At United Claim Clinic our number one mission is to educate consumers about the insurance claim process. Sometimes we can equip people with the knowledge to navigate a claim by themselves. For more complicated claims, we are here to be an advocate for the insured to see that the carrier fulfills their obligation to get your property and life back to normal.