If you have been injured in a car accident, there may be several options available to you when it comes to getting compensation for your losses, from vehicle damage to personal injury.
You may have a claim against the other driver who caused the car accident. In many states, you can also bring a "third party" insurance claim or lawsuit directly against the other driver's insurance company as well. Depending on the circumstances of the car accident, you may also be able to bring a claim against your own insurance company for compensation. (Get the basics on Settling a Car Accident Claim.)
In years past, the laws in most states obligated insurance companies to act in good faith only when dealing with claims brought by persons to whom the insurance company had issued a policy of insurance. But in recent years many states have expanded this duty to encompass other situations, and created new duties on the party of insurance companies. The result is that most states now require insurance companies to act in good faith and deal fairly with any person making a claim, regardless of whether that person is a policyholder with the insurance company.
Depending on the state, the requirements are different and the laws might operate under different names. For example, many states have laws that are known as "Fair Claims Practices Acts." In other states the requirements for insurance companies aren't found in the acts of legislatures (lawmakers), but rather in the language of various legal rulings handed down in the state's court system. For the most part, however these rules come about from state to state, these days an insurance company is required to act in "good faith" when handling a claim and when dealing with any person who presents an insurance claim. If an insurance company fails to abide by this requirement, the insurance company is said to have acted in "bad faith."
Generally, an insurance company has acted in bad faith if it fails to fulfill the obligations stated in the insurance policy language, or if it fails to abide by the laws of the particular state where the claim is made. Examples of bad faith might include the following acts by the insurance company:
There are numerous other obligations that an insurance company has in dealing with insurance claims, and these duties vary from state to state.
While one state may require a certain action by the insurance company in a claims situation, the state next door may not impose that same requirement. Some states limit bad faith to situations where the person presenting the insurance claim is a policyholder with that particular insurance company, whereas other states don't have that requirement. So, in those states, if you're bringing a claim against the other driver for causing the accident and the driver's insurance company is not acting fairly, you may have a claim for bad faith.
If the insurance company acts in bad faith in its dealings with you, then you may have a new legal claim to bring against the insurance company for its actions. This is in addition to the original claim you presented to the insurance company for the property damage and bodily injury you suffered in the car accident. It is important to understand that pursuing a bad faith claim against an insurance company is a very complicated and specialized area of the law.
Bottom line: There are some claims that you can handle on your own as long as you feel comfortable doing so, but a bad faith action is not one of those. If you think you might have a viable bad faith claim against your car insurance carrier, it is important that you talk about the situation with an experienced attorney who will explain your legal options and make sure your rights are protected every step of the way.