Bad Faith Insurance Practices Explained

You pay your premiums every month. You follow the rules. When disaster strikes, you expect your insurance company to step up and cover your claim.

That’s not always what happens. Our friends at The Law Office of Bennett M. Cohen work with people who’ve been blindsided by insurers that refuse to honor their obligations. If you’re facing an insurer that won’t play fair, an insurance dispute lawyer can help you understand your options and fight back.

What Is Bad Faith Insurance

Bad faith happens when your insurance company doesn’t hold up its end of the bargain. Every insurance policy comes with an implied promise that the company will deal with you honestly and fairly. They’re supposed to investigate your claim properly, handle it in good faith, and pay what they legitimately owe you. When they don’t do these things, that’s bad faith. It might be intentional wrongdoing, or it might be negligence. Either way, it leaves you holding the bag when you need help most.

Common Bad Faith Tactics

Insurance companies have developed a whole toolkit of strategies to avoid paying legitimate claims. Some of these tactics are obvious. Others are more subtle.

Unreasonable Claim Denials

Your claim gets rejected even though you’ve got clear documentation and coverage. The insurer twists policy language to mean something it doesn’t, ignores evidence that supports your case, or invents creative reasons to say no. If your claim is legitimate and you’ve got the paperwork to prove it, denial without solid justification is a red flag.

Inadequate Investigation

Companies are required to actually look into your claim before they make a decision. Bad faith shows up when they skip this step entirely or phone it in. Maybe they don’t interview witnesses. Maybe they refuse to review your medical records. Maybe they never bother inspecting the damage you reported. Cutting corners on investigation is a clear sign that something’s wrong.

Lowball Settlement Offers

Your insurer knows what your claim is worth. They’ve got actuaries and adjusters who do this for a living. When they offer you a fraction of what you’re owed, they’re betting you’ll take the quick money rather than fight for what’s fair. Don’t fall for it.

Excessive Delays

Some companies will drag things out for months. They ask for the same documents over and over. They take weeks to answer simple questions. Sometimes they just stop communicating entirely. These delays aren’t accidental. They’re designed to wear you down until you accept whatever they’re willing to give you.

Changing Explanations

Watch out when an insurer keeps shifting their story. First, they deny your claim for one reason. Then they come back with a completely different justification. If they’re scrambling to find any excuse that sticks, you’re probably dealing with bad faith.

Types of Bad Faith Claims

Bad faith disputes generally fall into two buckets.

First-Party Bad Faith

This is between you and your own insurance company. You filed a homeowners’ claim, and they denied it. Your auto insurer won’t cover the accident. Your health insurance refuses to pay for necessary treatment. Your disability claim gets rejected. You paid for protection, and now they won’t provide it.

Third-Party Bad Faith

This happens when someone else’s insurance company refuses to settle a claim against their policyholder fairly. If another driver’s insurer won’t negotiate within policy limits and that causes you additional harm, they might be acting in bad faith toward you, even though you’re not their customer.

Legal Protections for Policyholders

State laws give you real protection against bad faith practices. Most states set specific deadlines for insurers to respond to claims, complete investigations, and issue payments. Missing these deadlines can be evidence of bad faith. Regulators can also punish companies that engage in unfair claim settlement practices. Fines, sanctions, and license revocations keep most insurers in line. But not all of them.

Your Rights When Insurers Act in Bad Faith

You’re not powerless when an insurance company treats you unfairly. You can file a complaint with your state’s insurance department. You can sue the company directly. And you can potentially recover damages that go way beyond your original claim. Bad-faith lawsuits can get you compensation for the emotional distress the insurer caused. Courts can award punitive damages to punish companies that act egregiously. You might even recover your attorney fees. These remedies exist because lawmakers recognized that insurance companies have enormous power over policyholders who need their help.

Taking Action Against Bad Faith Insurers

Don’t let an insurance company push you around. Start documenting everything right now. Save every email, letter, and text message. Keep detailed notes of phone conversations, including dates, times, and who you spoke with. Track every delay and every request for additional information. If you think your insurer is acting in bad faith, you need someone on your side who understands how these companies operate. Legal representation changes the dynamic completely. Contact a qualified attorney who handles insurance disputes to discuss what happened and explore your options for holding the company accountable.