What Is Insurance Bad Faith?

When you purchase an insurance policy, you expect your provider to handle your claims fairly and in good faith. Unfortunately, not all insurance companies act ethically. Some engage in bad faith practices—deliberately delaying, underpaying, or denying legitimate claims. Recognizing the signs of insurance bad faith early can help policyholders take action before they suffer financial losses or unnecessary stress. Here’s what to look out for and what to do if you suspect bad faith.

Insurance bad faith occurs when an insurance company fails to uphold its contractual obligations to policyholders. This can happen in a variety of ways, including unreasonable delays, unfair denials, and deceptive practices designed to avoid paying claims. Every policyholder has legal rights, and insurers are required to act in good faith when evaluating and processing claims.

Early Warning Signs of Insurance Bad Faith

1. Unreasonable Delays in Processing Your Claim

If your insurer is taking an unusually long time to process your claim without a valid explanation, this may be a red flag. Delays could include:

• Not responding to your calls or emails promptly

• Requesting unnecessary or excessive documentation

• Providing vague or conflicting information about claim processing timelines

• Prolonged investigations without clear updates

2. Denying a Claim Without a Clear Explanation

A legitimate denial should include a detailed reason based on your policy terms. If your insurance company refuses to explain why your claim was denied, or gives a generic, unclear response, they may be acting in bad faith. Some examples include:

• Claiming a lack of coverage when the policy states otherwise

• Vague reasons such as “insufficient evidence” without further clarification

• Refusing to cite specific policy language to justify the denial

3. Offering an Unreasonably Low Settlement

If your insurance company offers a settlement far lower than the actual damages or costs covered by your policy, this may be a sign of bad faith. Tactics used to justify lowball offers include:

• Disregarding key evidence (such as repair estimates or medical bills)

• Ignoring industry-standard valuations

• Pressuring you to accept a settlement quickly without negotiation

4. Misrepresenting Policy Terms or Coverage

Insurance companies are required to accurately explain policy terms and coverage limits. However, bad faith practices may involve:

• Misrepresenting exclusions or limitations to avoid paying claims

• Incorrectly stating that a particular incident is not covered

• Changing their interpretation of policy language without justification

5. Failing to Conduct a Proper Investigation

A fair claims process requires a thorough and unbiased investigation. If an insurance company routinely ignores key evidence, fails to interview relevant parties, or dismisses supporting documentation without explanation, this is a clear warning sign of bad faith.

6. Intentionally Stalling Communication

If your insurer is avoiding communication, it may be a deliberate attempt to frustrate you into giving up on your claim. Common stalling tactics include:

• Ignoring phone calls and emails

• Frequently changing claim adjusters

• Repeatedly requesting documents they already have

7. Intimidation or Unfair Pressure Tactics

Some insurance companies use intimidation tactics to discourage policyholders from pursuing claims. This may include:

• Threatening to cancel your policy if you pursue your claim further

• Insisting you don’t need legal representation

• Pressuring you to accept a settlement quickly before you fully understand your damages

What to Do If You Suspect Insurance Bad Faith

If you recognize any of these warning signs, take action immediately to protect your rights:

1. Document Everything

Keep detailed records of all communications with your insurance company, including:

• Emails and letters

• Phone call logs (date, time, name of the representative, and summary of discussion)

• Copies of submitted documents

• Any responses from the insurer

2. Review Your Insurance Policy

Carefully read through your policy to understand your coverage, exclusions, and claim procedures. Make sure your insurer is following the terms of the contract.

3. Request a Written Explanation

If your claim is denied or delayed, ask for a written explanation outlining the specific reasons and policy provisions supporting their decision.

4. Contact Your State Insurance Department

Each state has an insurance regulatory body that oversees insurer conduct. You can file a complaint if you suspect bad faith practices.

5. Seek Legal Assistance

If your insurer continues to delay, deny, or underpay your claim without just cause, consider consulting an insurance bad faith attorney. A lawyer can help you:

• Demand fair compensation

• File a bad faith insurance claim

• Negotiate with the insurer

• Pursue legal action if necessary

Recognizing the signs of insurance bad faith early can save you time, money, and frustration. If your insurance company is acting unfairly, don’t wait to take action. Stay informed, document everything, and seek legal guidance if necessary. You have rights, and insurers must be held accountable when they fail to act in good faith.