Insurance Bad Faith: How Attorneys Protect Your Rights

When you purchase an insurance policy, you expect the company to honor its commitments in the event of an accident, injury, or property loss. Unfortunately, not all insurance companies act in good faith. Some engage in practices that delay, deny, or underpay legitimate claims. This is known as insurance bad faith.

If you suspect your insurance company is acting unfairly, an experienced attorney can help protect your rights, navigate the claims process, and seek full compensation. This article explains what insurance bad faith is, common examples, and how attorneys fight for policyholders.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company acts unreasonably in handling a claim, violating the policyholder’s rights. Insurers have a legal obligation to act in good faith and deal fairly with their clients. When they fail to do so, they may be held liable for damages beyond the original claim amount.

Some common forms of bad faith include:

Unreasonable Denials – Denying a valid claim without a legitimate reason.
Delays in Payment – Deliberately slowing down the claims process to pressure the policyholder.
Lowball Settlements – Offering significantly less than what the policyholder is entitled to.
Failure to Investigate – Ignoring or inadequately investigating the facts surrounding a claim.
Misrepresentation of Policy Terms – Misleading policyholders about coverage or exclusions.

Insurance bad faith can occur in any type of insurance, including auto, health, home, disability, or life insurance policies.

Common Examples of Insurance Bad Faith

Understanding the tactics insurers use can help you recognize when bad faith may be occurring:

Auto Insurance – Your claim is denied even though liability is clearly covered, or payment is delayed for months.
Health Insurance – Denying coverage for necessary medical treatment, claiming it’s “experimental” or “not medically necessary” without proper review.
Homeowners Insurance – Refusing to cover storm or fire damage, underestimating repair costs, or ignoring evidence of the loss.
Disability Insurance – Rejecting claims despite medical documentation showing the inability to work.
Life Insurance – Refusing to pay beneficiaries, questioning the validity of the policyholder’s death, or claiming misrepresentation without proof.

These practices are not only unfair—they are illegal in most states, and policyholders may be entitled to damages beyond the original claim.

Why You Need an Attorney for Insurance Bad Faith

Insurance companies have teams of adjusters and attorneys whose job is to minimize payouts. Facing them alone can be daunting. An attorney specializing in insurance bad faith can level the playing field. Here’s how:

1. Evaluating Your Claim

An attorney will review your policy and the denial or settlement offer to determine if your claim was handled improperly. They examine whether the insurer:

Followed the terms of the policy.
Investigated the claim thoroughly.
Communicated reasonably and in a timely manner.

This evaluation is critical in deciding the next steps, whether it’s negotiating a settlement or filing a lawsuit.

2. Gathering Evidence

Proving bad faith requires strong evidence. Attorneys know how to collect and organize documentation, such as:

Policy documents and correspondence.
Claim forms and denial letters.
Medical records, repair estimates, or accident reports.
Internal insurer communications (sometimes obtained through discovery in litigation).

Proper evidence can demonstrate a pattern of unreasonable behavior or deliberate misconduct by the insurance company.

3. Negotiating Settlements

Many insurance bad faith cases are resolved through negotiation rather than trial. Attorneys can negotiate aggressively on your behalf, seeking fair compensation for:

The original claim amount.
Additional damages caused by the insurer’s bad faith, such as emotional distress, financial hardship, or attorney fees.

Without an attorney, you may be pressured to accept a settlement far below what you deserve.

4. Filing a Bad Faith Lawsuit

If negotiation fails, an attorney can file a lawsuit against the insurer. In many states, policyholders may recover punitive damages if the insurer acted intentionally or recklessly. Lawsuits can also compel the insurance company to pay your original claim plus interest and legal costs.

Signs You May Be a Victim of Insurance Bad Faith

Knowing the warning signs can help you act quickly:

Your claim is denied without a clear explanation.
The insurer refuses to communicate or delays responses excessively.
Settlement offers are far below the documented value of your loss.
Requests for documentation or proof are unreasonable or repetitive.
The insurer misrepresents your policy coverage.

If you experience any of these, it’s time to consult with an experienced insurance attorney.

Choosing the Right Insurance Bad Faith Attorney

Not every lawyer is equipped to handle insurance bad faith claims. When choosing an attorney, consider:

Experience – Look for attorneys who specialize in insurance law and bad faith cases.
Track Record – Ask about past results and settlements.
Fee Structure – Many attorneys work on a contingency basis, so you pay only if you win.
Communication – Choose an attorney who explains the process clearly and keeps you informed.

The right attorney can make a significant difference in recovering full compensation.

Steps to Take If You Suspect Bad Faith

Document Everything – Keep all letters, emails, and phone call records with the insurance company.
Don’t Accept Low Settlements – Avoid agreeing to offers until you consult an attorney.
Gather Supporting Evidence – Collect medical records, repair bills, or other proof of your losses.
Consult an Attorney Promptly – Many states have time limits for filing bad faith claims, so acting quickly is crucial.

Final Thoughts

Insurance bad faith is a serious issue that can leave policyholders unfairly burdened with financial losses, stress, and uncertainty. Attorneys specializing in this area play a critical role in protecting your rights, ensuring insurers honor their obligations, and seeking additional compensation for damages caused by unfair practices.

If you feel your insurance claim has been mishandled, do not delay. Consulting an attorney promptly can increase your chances of a fair resolution and hold the insurance company accountable for acting in bad faith. With legal support, you can navigate the claims process confidently and ensure you receive the compensation you are entitled to.