What Is Bad Faith Insurance?

What Is Bad Faith Insurance?

An insurer that stalls, lowballs or shuts down a fair claim may be breaking the law.

Key Takeaways

• An insurance company acts in bad faith when it handles a valid claim unfairly.
• An insurer acting in bad faith may deny the claim without a good reason, delay payment or offer far less than the claim is worth.
• To prove bad faith, you need records that show how the insurer handled the claim, what evidence it ignored and why its delay, denial or low offer was unreasonable.
• A fair settlement offer should cover your current costs and any future losses tied to the claim.

When you file a claim after getting hurt in an accident, you're trusting the insurance company to handle your personal injury claim fairly. Insurance companies have a legal duty to act in good faith, which means investigating your claim properly and paying what they owe under the policy.

Most insurers follow through on that duty, but some don't. Learn what bad faith insurance is and how to know when a company has crossed that line with your injury claim.

What’s the Meaning of Bad Faith Insurance?

Bad faith insurance is when an insurer doesn't handle a claim the way the law requires, whether that means investigating it properly, communicating clearly or paying what's owed within a reasonable time. This duty applies most directly when you're dealing with your own insurance company, such as through uninsured motorist or medical payments coverage, since insurers owe their own policyholders honest and fair treatment.

If you're filing a claim against another person’s insurance company, that company's duty of good faith belongs to its own policyholder, the at-fault person, not to you directly. But when an insurer refuses a reasonable settlement despite clear liability, it can leave its own policyholder exposed to a judgment beyond the policy limits, which is often how bad faith issues surface in personal injury cases.

Mistakes happen, and not every error counts as bad faith. The difference comes down to whether the company acted unreasonably or dishonestly, rather than simply making a judgment call someone disagrees with.

What’s an Example of a Bad Faith Personal Injury Claim?

Bad faith insurance can show up in many forms throughout a personal injury case, including:

• Delaying the investigation
• Ignoring evidence
• Asking for the same records over and over
• Refusing to explain a denial
• Making settlement offers that don’t reflect what the claim is actually worth

These tactics can suggest the insurer is stalling instead of working toward a fair resolution. When an insurance company denies a claim, it should have a valid reason for doing so and be able to explain that decision clearly.

How Do You Prove an Insurance Company Acted in Bad Faith?

Proving bad faith on a personal injury claim takes more than a feeling that your insurer treated you unfairly. You need evidence showing how the company handled the claim and why that conduct was unreasonable.

Use Insurance Information To Understand the Available Coverage

Insurance information helps show which insurance policy could cover the accident or injury claim, what coverage was available and what the insurance company had to review before making a decision. This may include the at-fault party’s liability policy, your own policy if you made a claim with your insurer, coverage limits, exclusions and claim requirements.

These records can help show whether the insurer had a valid reason to deny coverage or whether the policy appeared to support payment. In a bad faith claim, the question is whether the insurance company followed the policy, reviewed the coverage fairly and gave a reasonable explanation for its position.

Document All Communication

Records of every phone call, email and letter exchanged with the insurance company often play a role in bad faith insurance claims. Details like the date, the name of the person on the call and what they said can reveal patterns, such as repeated excuses or contradictory statements, that point to unfair handling.

Prove the Insurance Company Failed To Investigate Properly

Before an insurer denies or reduces your claim, it should look into the facts. If the company doesn’t inspect the damage, talk to witnesses or request your medical records, you may be able to use the incomplete investigation as evidence of bad faith.

Show That the Insurer Ignored Important Evidence

Sometimes an insurance company receives important evidence but doesn't address it in its decision. If you submitted a police report, medical records or photos, and the insurer’s decision doesn't reflect that evidence, it may show that the company failed to fairly consider your claim.

Point to a Settlement Offer That Was Unreasonably Low

You can compare the insurer’s settlement offer with your documented losses, including medical bills, lost income, pain and suffering and property damage. If the offer is much lower than those losses without a clear explanation, it may suggest that the company didn't fairly evaluate your claim.

What Are Signs of a Good Settlement Offer?

Not every low settlement offer is due to bad faith, and not every quick offer is a sign that the insurance company acted in good faith, either.

A reasonable settlement offer typically:

• Covers your current and future losses
• Accounts for medical bills, lost income and other costs
• Reflects the strength of your evidence
• Doesn't pressure you to settle too quickly
• Makes sense when you compare the offer to the cost and risk of taking the case to court

If a settlement offer is missing several of these signs, take a closer look at how the insurance company arrived at that number and whether it lines up with your documented losses.

Is It Hard To Win a Bad Faith Claim?

A bad faith insurance claim tied to a personal injury case can be difficult to win. Courts often give insurance companies some room for honest mistakes or genuine disagreements over what a claim is worth. The hardest part is proving the insurer's conduct went beyond a reasonable mistake and crossed into unfair claim handling.

Because that line is hard to prove on your own, a personal injury attorney can request the insurer's internal claim file, something you generally can't obtain without legal action, and use it to show whether the company's conduct meets the legal standard for bad faith in your state.

Sargon Law Group Can Help With a Bad Faith Insurance Dispute

When an insurance company refuses to treat you fairly after an accident, it adds stress to an already difficult situation. Sargon Law Group advocates for injury victims across Arizona, California, and Colorado, stepping in when insurers resort to stalling tactics or unfair delays.

Our firm looks into your policy details, claim history, and settlement offers to determine exactly where the insurer's behavior crossed the line. Because we handle every case on a contingency fee basis, you can fight back without any upfront financial strain.

Because bad faith can be difficult to recognize and prove, getting legal guidance may help your claim. Protect your rights and get the clear answers you deserve. Contact Sargon Law Group today to schedule a free consultation with a dedicated personal injury attorney.