If an insurer fails its obligations to act reasonably and justly, you can potentially sue the insurance company for bad faith and pursue legal remedies. When insurance companies, or carriers, prioritize profits over their policyholders’ well-being, it can leave people without the means to replace damaged property or recover from serious injuries. If you’ve been harmed in an accident and the carrier seems to be working against you, their actions may be a breach of their contractual duties. When that’s the case, the attorneys for bad faith insurance claims at Davis, Bethune & Jones can help evaluate your situation for potential wrongdoing and legal options.
What Is ‘Bad Faith’ in Insurance?
When an insurance company breaches its contractual obligations to treat policyholders with fairness and honesty, those acts are considered ‘bad faith.’ A denied or reduced claim alone does not establish bad faith; the issue is whether the insurer acted unreasonably or without proper justification. The following are examples of allegations of insurance claims made in bad faith:
- No response or an unreasonably slow response to a claim
- Denying a claim without just cause or explanation
- Refusing to investigate an incident
- Offering a settlement far less than the claim’s actual worth
- Misrepresenting policy terms, coverage, or cost
Is It Hard To Sue an Insurance Company?
Suing a carrier is challenging due to the complexities of insurance law and the avoidance tactics and denials insurers deploy. These claims typically require assistance from a law firm that handles this practice area.
Bad faith insurance laws, available damages, and procedural requirements vary by jurisdiction, and outcomes depend on the specific facts of each case. These attorneys understand what evidence and standards must be met to show an insurer acted unreasonably, deceptively, or without validity.
Why a Bad Faith Claim’s Origin Matters
A first-party lawsuit involves suing your own carrier, such as your health insurer, for denying a procedure in bad faith. A third-party lawsuit alleges wrongdoing by another person’s carrier, such as a liability insurer that undervalues a claim for a car wreck.
The party filing the bad faith insurance lawsuit determines the case’s eligibility, burden of proof, and recoverable damages, and these requirements vary significantly by jurisdiction. Not all courts recognize third-party claims against insurance providers.
If you’re offered a low-ball settlement for a catastrophic injury in a jurisdiction where these legal actions are barred, you may need to explore other avenues for recovery. Consider consulting with an attorney to understand your state’s statutes and how these apply to your situation.
First-Party vs. Third-Party Claims Against Carriers
It’s important to understand how a case’s circumstances can impact the complexity of legal proceedings, which jurisdictions apply, and how damages are paid, as shown in this grid.
| Category | First-Party Claims | Third-Party Claims |
| Who Is Sued | Your own insurer | The at-fault party’s insurer |
| Procedural Complexity | Relatively straightforward legal process and burden of proof | Complicated, often lengthy legal process |
| Availability by Jurisdiction | Allowed in most jurisdictions; recoverable damages vary | Not allowed in certain jurisdictions |
| Pre-requisites | Valid coverage and compliance with policy requirements | Assignment from the at-fault insured |
| Damages Focus | Direct financial and personal harm caused by the denial or delay | Liability protection the insurer failed to provide (e.g., excess judgment or over-limit amount) |
What Is the Success Rate of Suing Insurance Companies?
The exact success rate of suing an insurance company for bad faith is unknown because many of these cases settle out of court confidentially. Success often depends on early evidence preservation and whether the insurer’s conduct can be shown to be unreasonable under the circumstances. The following are some of the elements that can introduce challenges to proving a bad faith insurance claim:
- First- or third-party filer
- Policy terms and limits
- Coverage type—medical, automobile, or homeowners—and inherent complexities
- What the jurisdiction constitutes as a contract violation
The Elements of Bad-Faith Insurance Claims
The burden of proof—what your case must show—varies by jurisdiction. Generally, bad faith denial of insurance claims or unjust delays must illustrate four basic facts.
1. The Insurer’s Duty
The person harmed must demonstrate they had a valid insurance policy and a legitimate claim for benefits, which obligates an insurer to act in good faith.
2. The Insurer’s Breach of Duty
The insurer breached its contract with the policyholder through conduct that unreasonably denied, delayed, or undervalued a claim, or a failure to investigate or communicate earnestly.
3. The Insured’s Damages
The person harmed must prove sustained damages as a direct result of the insurer’s misconduct. Policy benefits, emotional distress and mental anguish, and financial losses due to medical bills or property damage are examples of bad faith insurance recoverable damages that may be recognized by law, depending on the jurisdiction and case facts.
4. The Conduct Caused the Damages
A direct link between an action and harm, known as causation, must show that the person’s damages resulted from the insurer’s bad faith conduct.
Note: Certain statutes may only require showing an unreasonable delay or denial, while others may require proving the insurer acted with knowledge or reckless disregard.
Evidence of Insurer Misconduct
A bad faith claim against an insurance company requires extensive documentation, both of their actions or inactions and of the original claim. You should begin building a paper trail as soon as you suspect a carrier is violating their obligations to you. What constitutes ‘unreasonable’ can vary. This list isn’t an inclusive list, but it provides examples of what you can do when you suspect an insurance company is acting in bad faith:
- Document Everything: Gather medical records, accident reports, and other evidence of the associated incident.
- Request Explanations in Writing: Keep detailed records of all communications and transactions with your insurer and request any verbal denials or discussions in writing.
- Retain Damages Records: Collect evidence to support bad faith insurance recoverable damages, such as wage-loss statements, bills or invoices, impact statements and testimonials, a timeline to calculate interest, and other impacts, as allowed by state law.
- Gather Policy Documentation: Preserve any hard copy or electronic policy documents, including proof of payment and enrollment, to demonstrate the insurer’s obligation to you.
- What not to do: Avoid giving recorded statements, accepting partial settlements, or signing releases without legal review, as these actions can limit or eliminate bad faith claims.
Assistance for Bad Faith Insurance Denials or Delays
Speaking up against an insurance company’s misconduct can increase transparency of the business’s practices, promote accountability, and, in some jurisdictions, deter future misconduct, where statutes allow enhanced damages. People generally can find assistance for bad faith insurance denials by reporting the company to state agencies and taking legal action.
Reporting a bad faith insurer to a state agency can encourage compliance and potentially trigger investigations that increase consumers’ protection from future unfair practices. You may still be able to sue an insurance company for bad faith after reporting it to state regulators. Legal action may allow a court to consider damages beyond policy limits, or, in limited circumstances, punitive damages.
If you suspect a carrier’s bad faith practices have impacted your life, consider speaking to a lawyer with experience in these cases. Whether you’ve had a claim denied or undervalued, contact the attorneys at Davis, Bethune & Jones for a free evaluation of your potential options.