Insurance Company Bad Faith Claims

If the insurance company is denying your injury claim or negotiating in bad faith, here's what you can do.

Updated by , J.D. · University of San Francisco School of Law
Updated by Dan Ray, Attorney · University of Missouri–Kansas City School of Law

When you bring a personal injury claim, most often you're dealing with an insurance company—yours or someone else's. The insurance company is legally required to act in good faith to resolve your claim. If you believe the insurance company isn't handling your personal injury case in good faith, what can you do?

Certain phrases used in the industry have the power to make insurance adjusters sit up and take notice. "Bad faith" is one such phrase. We'll explain what a bad faith insurance claim is, and why it's likely to get the insurance company's attention.

Insurance Companies Must Act in Good Faith to Resolve Claims

When you buy an insurance policy, the insurance company promises to act in good faith to resolve claims that are covered by the policy. The insurance company owes this duty of good faith to you, its insured policyholder. If the company doesn't act in good faith—if it acts in bad faith—you might have a bad faith claim against the insurer.

State law determines what's required to have a bad faith claim. Some states require proof that the insurer acted intentionally, meaning that negligence (carelessness) alone won't suffice. In general, to prove a bad faith claim, you must show that:

  • the insurance company failed to pay benefits due under a policy, and
  • the refusal to pay was unreasonable.

Proving a bad faith claim isn't easy. The fact that you and your insurance company have different opinions about the value of a claim, without more, probably doesn't mean the company acted in bad faith. Likewise, a simple mistake in handling a claim doesn't amount to bad faith.

Here are some examples of the kinds of actions that might amount to bad faith:

  • denying a claim or making a very low settlement offer without any reasonable explanation
  • refusing to settle when liability and damages are clear
  • considering only evidence that supports denying a claim while ignoring evidence that supports payment
  • misrepresenting policy terms to avoid paying a claim
  • refusing to investigate a claim, or conducting only a hasty, substandard investigation, and
  • other improper actions the company knowingly and deliberately takes to avoid its obligations under the insurance policy.

If you're trying to figure out whether your insurer might have acted in bad faith, think about consulting a lawyer who has expertise in bad faith cases.

Your Own Insurance Company Versus a Third-Party Insurer

If you're bringing a claim against an insurance company, the insurance company's duty to you will depend on whether the claim is a "first-party claim" or a "third-party claim." Let's take a look at both.

First-Party Claim: A Claim Against Your Own Insurance Policy

A claim against your own insurance policy is called a first-party claim. For example, if you bring a claim for benefits against your own uninsured or underinsured motorist coverage, that's a first-party claim.

When you're trying to negotiate a settlement with your own insurance company, it's typically easier to show bad faith—though it's still a pretty high bar to clear. 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 your claims in good faith.

Third-Party Claim: A Claim Against Someone Else's Insurance Policy

When you bring a claim against someone else's insurance policy, that's called a third-party claim. The insurance company still has a duty to resolve your claim in good faith, but as a rule, that duty is owed to the insured, not directly to you. Whether you can bring a bad faith claim and if so, under what conditions, is a question of state law. If you believe a third-party insurer has handled your personal injury claim in bad faith, it's time to contact an experienced attorney.

Bringing Up Bad Faith

If you believe an insurance adjuster isn't handling your claim in good faith, let the adjuster know. Here's how to do that, and the response you might get when you do.

How to Raise Bad Faith

When you think you've got evidence that the insurance adjuster isn't acting in good faith, use "bad faith" in a conversation with the adjuster. And be ready: The adjuster might react very sharply to any accusation of bad faith, and forcefully deny it. Don't back off and don't be intimidated. By using the words "bad faith," you've struck a nerve.

If you don't get a satisfactory response, think about writing a bad faith letter to the insurance company. In your letter, describe what the adjuster did (or failed to do) that you believe to be proof of bad faith. Check out the "Sample Letter Claiming Bad Faith" below to get an idea of what your bad faith letter might look like.

The Response You Might Get

Don't be surprised if your bad faith letter gets prompt attention. Why? If you're able to prove that an insurance company acted in bad faith, the company may be liable to pay bad faith damages well above the actual losses stemming from the claim. At the very least, a threatened bad faith claim might cause the insurance company to bring in a new adjuster (or a claims supervisor) to handle your claim.

In settlement negotiations, the possibility of a fight over bad faith often can help nudge a reasonable settlement offer out of an insurance company.

Sample Letter Claiming Bad Faith

Alice Mendoza
123 Broadway
Redhook, IL 00000

June 15, 20xx

Ronald Firth

Claims Adjuster
Metropolitan Insurance Co.
St. Louis, MO 00000

Re: Your Insured, Alice Mendoza
Claimant: Alice Mendoza
Claim No.: 93-HQ1234
Date of accident: January 13, 20xx

Dear Mr. Firth:

This letter concerns the discussions you and I have had over the past several weeks concerning settlement of the uninsured motorist claim referenced above. You have made only one offer of settlement in the amount of $500. This offer bears no reasonable relationship to my injuries, since my medical expenses alone total $1,850. Yet you refuse to provide me with any explanation for your position.

The only conclusion I can come to is that Metropolitan Insurance Company is refusing to negotiate in good faith.

If no fair and reasonable settlement offer, or explanation for the lack of such an offer, is made by July 1, 20xx, I will be forced to take further steps regarding Metropolitan's apparent bad faith.

Yours truly,


Alice Mendoza

Get Help With Your Bad Faith Claim

A bad faith claim isn't something you should make lightly or frivolously. Stated a bit differently, if you're going to allege bad faith, you'd better have the proof. As mentioned above, it's extremely difficult to win a bad faith case in court. State bad faith laws can be complicated and difficult to understand.

If you think you might have a bad faith claim, your best move will be to speak to an experienced lawyer before you raise it with the insurer. If your potential bad faith claim is worth pursuing, a lawyer who handles bad faith claims will know how best to raise the issue with the insurance company.

Here's how to find an attorney who's right for you and your claim.

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