The Implied Covenant of Good Faith
Every insurance policy contains an implied covenant of good faith and fair dealing that requires the insurer to handle claims honestly, promptly, and fairly. When an insurer breaches this covenant in handling a personal injury claim, the insured or injured third party may have a bad faith claim that extends beyond the original policy benefits.
Bad faith can occur in first-party claims where you are seeking coverage from your own insurer, or in third-party claims where the insurer handles your claim against their policyholder. The legal standards and remedies differ between these contexts, but the core principle is the same. Insurers must treat claimants fairly or face consequences beyond the original claim amount.
Common Bad Faith Tactics in Injury Cases
Unreasonable Delay
Insurers intentionally delay the claims process knowing that financial pressure forces claimants to accept inadequate settlements. Tactics include repeatedly requesting documents already provided, transferring claims between adjusters to restart timelines, failing to respond to communications, and scheduling unnecessary independent medical examinations.
Inadequate Investigation
Before denying or underpaying a claim, insurers must conduct a thorough investigation. Failing to interview witnesses, review medical records, inspect damage, or consider favorable evidence constitutes bad faith. Some insurers conduct sham investigations designed to reach predetermined conclusions rather than objectively evaluate the claim.
Misrepresentation of Coverage
Adjusters who make false statements about policy terms, legal rights, or damages availability may be acting in bad faith. Telling an injured victim that pain and suffering is not recoverable, that the statute of limitations has expired when it has not, or that medical treatment was unnecessary when it clearly was, are examples of misrepresentation.
Lowball Offers and Coercion
Offering settlements far below the claim's reasonable value and pressuring claimants to accept through artificial deadlines or threats of denial can constitute bad faith. While insurers have the right to negotiate, systematic undervaluation supported by false justifications crosses the line into bad faith territory.
Signs Your Insurer Is Acting in Bad Faith
Recognizing bad faith early allows you to respond strategically before the insurer entrenches its position. Red flags include persistent failure to return calls or emails, requests for irrelevant or redundant documentation, unexplained claim transfers, refusal to provide claim status updates, denial without written explanation, and settlement offers that do not account for documented damages.
Document every interaction with the insurance company. Keep a detailed log of phone calls with dates, times, adjuster names, and conversation summaries. Save all emails and letters. Request the claim file in writing under your state's insurance regulations. This documentation becomes evidence if bad faith litigation becomes necessary.
Remedies for Bad Faith
Bad faith remedies vary by state but typically include compensatory damages for the financial losses caused by the insurer's misconduct, consequential damages for indirect losses such as damaged credit or lost opportunities, emotional distress damages, attorney fees, and in egregious cases, punitive damages.
Some states allow injured third parties to sue the at-fault driver's insurer directly for bad faith, while others limit bad faith claims to policyholders. Understanding your state's specific bad faith framework is essential to pursuing the appropriate remedy.
When to Consult a Bad Faith Attorney
If you believe your insurer has treated you unfairly and the misconduct has caused meaningful harm, consult an attorney who specializes in insurance bad faith litigation. These cases are complex, and insurers defend them aggressively. An experienced attorney can evaluate whether your situation supports a bad faith claim and can pursue the additional compensation you deserve.
