If you believe that an insurance company isn't negotiating in good faith, what can you do? Key phrases commonly used in the insurance industry sometimes make adjusters sit up and take notice. When you are negotiating a settlement with your own insurance company (for example, as part of your uninsured or underinsured motorist coverage), “bad faith” can be one such phrase. Because your policy is a paid-for promise by your insurance company to provide you with insurance protection, the company has a duty to provide that protection and to negotiate and settle claims in good faith.
Insurance companies for third parties also have a duty of good faith toward an injured person, but that duty is much less than the duty owed by your own company. A claim of bad faith against a third party’s insurance company arises only if the company, through its adjuster, has engaged in outright lies or fraud or has interfered with your ability to pursue the claim (such as by tampering with a witness, withholding evidence, or the like). If you believe a third-party insurer has engaged in such outrageous behavior, it's time to contact an experienced personal injury attorney.
An adjuster for your own insurance company is not negotiating in bad faith just because you and the adjuster have a difference of opinion about how much your claim is worth. However, bad faith may exist if the adjuster for your own company has refused to give you any specific reasons for a very low settlement offer or has said or done something which might amount to an improper settlement tactic.
If you believe the adjuster for your company is negotiating in bad faith, use the term in conversation with the adjuster. If you get no satisfactory response, you may want to put your accusation of bad faith in writing. In a bad faith letter to the insurance company, specifically refer to the conduct of the adjuster that you believe amounts to bad faith. Check out the "Sample Letter Claiming Bad Faith" below to get an idea of what this letter might look like.
A written accusation of bad faith often gets prompt attention and, if justified, may rapidly provoke a change in the adjuster’s settlement position. If an insurance company is proved to have acted in bad faith, it may be liable to pay damages to the insured well above the injury compensation amount. The rules about what is and is not bad faith vary from state to state, and it is extremely difficult to win bad faith damages in court. Nonetheless, in settlement negotiations, the mere possibility of a fight over bad faith often can help nudge a reasonable settlement offer out of an insurance company.
For a complete guide to the personal injury claim process, including what to do when the insurance company isn't co-operating to your satisfaction, get How to Win Your Personal Injury Claim, by Joseph Matthews (Nolo).