How To File a Bad Faith Insurance Claim
By Oni Harton, J.D. | Legally reviewed by Melissa Bender, Esq. | Last reviewed April 01, 2024
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When you purchase an insurance policy, you buy protection and peace of mind. Regardless of whether insurance laws require insurance, it's wise to have insurance coverage. It helps cover your losses and shields you from personal liability within policy limits.
Insurance can help policyholders deal with everything from property damage and healthcare costs to personal injuries from a car accident. Common types of insurance consumers purchase include the following:
When you pay your premiums, you expect your insurer to deal with you according to the terms of the insurance contract. It's important to know your insurance company will be there to help you should a covered event occur.
Whatever type of insurance is purchased, you expect the insurer to deal with you in good faith. If an insurer denies a claim for unjust reasons or without conducting a proper investigation, you may be able to pursue a bad faith action.
What Is an Insurance Bad Faith Action?
When an insurance company uses bad faith tactics to wrongfully deny claims, an insurance consumer can file a legal action against the insurance company. The particular causes of action depend on the jurisdiction. They may include a breach of contract claim or a tort action for bad faith.
Steps For Filing a Bad Faith Insurance Action
When insurance companies act in bad faith when dealing with valid claims, you have rights. The following steps, which are for informational purposes, explain filing a bad faith insurance claim. The information explains the general steps for filing a bad faith insurance claim.
Step 1: Review Your Insurance Contract
An insurance policy is a contract between you and the insurer. Before filing a bad faith lawsuit, determine if the insurer violated the contract. Review a copy of your policy before you file a claim. Make sure it's the full version of your contract and dated before you file your claim. Make certain your claim is covered under the terms of your contract.
Step 2: Keep Logs on Your Claim
As the claimant, you need to prove the validity of your claim. You must show that it falls within the terms of your policy. Gather all your documents and evidence. This can include any of the following:
- Photos
- Reports
- Receipts
- Estimates
- Correspondence with the insurance company
Put together a log detailing calls or meetings with the insurance company representatives, including the insurance adjuster. It's also helpful to contact your insurance agent who may be able to further clarify the insurer's claim procedure.
Never provide false statements during the claim process. Intentionally inflating the value of a claim or lost or damaged items constitutes insurance fraud. Most states have specific criminal laws for insurance crime.
Step 3: Document Denial of Claim
If the insurer denies your claim, request that a supervisor at the insurance company review the claim and denial. During the review process, your insurer will reconsider their denial of coverage. Again, document all your interactions with the insurance company and their statements regarding the denial.
If the denial is not reversed, consider appealing to your state's insurance regulatory agency. This agency is a state office charged with reviewing contested insurance claims.
Step 4: Make a Final Demand
Before you file a lawsuit, you may need to show that you tried to settle your claim. Send a written demand letter detailing your claim. Get proof they received it by using a return receipt. The insurer has between 15 to 60 days from when you made a demand to pay that claim.
Advise the insurer of your intent to pursue a claim for bad faith if the claim is not paid on time. You cannot file a lawsuit for bad faith unless the insurer refuses to pay the claim within that time.
Step 5: File a Complaint With Your State's Department of Insurance
Each state has a Department of Insurance or insurance commissioner that regulates insurance companies. If you haven't received a timely settlement, or you feel your claim has been mishandled, you can file a complaint with your state's Department of Insurance.
Among other responsibilities, the state regulator handles consumer complaints and most have a complaint form for insurance complaints. The particulars can vary by state. Most state agencies will attempt to resolve your dispute through mediation. You can file a lawsuit and a complaint with your state's Department of Insurance. However, doing both would limit the state's ability to seek a resolution through mediation.
Step 6: Initiate a Bad Faith Lawsuit
Filing a bad faith lawsuit against an insurance company is complicated. You'll need to decide whether to file in state or federal court. You must select a forum that has jurisdiction over the insurance company.
Your complaint will include additional claims such as fraud, breach of contract, and negligence. You should seek compensation under the policy and damages for the insurance company's bad faith. Even if the insurance company settles the claim, you can still pursue your bad faith lawsuit. Pursuing a bad faith claim through a lawsuit takes experience and expertise. An insurance lawyer can help.
Work With an Attorney on Your Bad Faith Insurance Claim
Every state has laws protecting consumers from bad faith tactics by insurers. If you believe you have been a victim of bad faith concerning an insurance claim, fighting the insurer can feel like an uphill battle.
Getting legal advice from a bad faith insurance attorney is prudent if you need to pursue a bad faith claim. An experienced lawyer will help you stand up to an insurance company that has compromised your claim with bad faith tactics. Consult a local insurance attorney to learn more about the bad faith claim process.
Next Steps
Contact a qualified attorney to assist with any issues related to insurance.
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