WHAT IS A BAD FAITH Insurance Claim?
When you buy insurance, your insurer has to treat you fairly and act in good faith when handling your claim. If they behave egregiously, and they delay, deny, or underpay your claim without a reasonable basis, they may be acting in bad faith, in which case, you might have some recourse.
Here’s everything you need to know:
*This information has been checked for accuracy and non-bias by licensed insurance experts, attorneys and representatives from National 501c3’s specialized in insurance advocacy. We are not insurance brokers. Consult with a licensed professional about your insurance policy and specific situation.
1.
What “Bad Faith” Actually Means
“Bad faith” may look like your insurance company:
Denying a valid claim without a proper investigation
Delaying payment or communication unreasonably
Offering far less than what your claim is worth
Misrepresenting your policy coverage
Failing to explain why a claim is denied or underpaid
Using confusing tactics to wear you down
Under California law, insurers should handle your claim:
Promptly
Fairly
Transparently
In accordance with your policy and state regulations
For a guide to your insurance rights, click here.
2.
Common Examples of Bad Faith Behavior
Ignoring emails, phone calls, or documentation
Claiming paperwork is “missing” repeatedly
Offering less than the amount shown in your contractor’s estimate without explanation
Refusing to pay for covered losses
Pressuring you to accept a low settlement quickly
Misstating what your ALE or extended replacement coverage includes
Bouncing you between adjusters excessively to foster difficulty
3.
How Do I Know If I Have a Case?
To really know if you have grounds to sue, you’ll need to consult an attorney, but you might have a Bad Faith case if:
You followed all required steps to document your loss
Your insurer has no valid reason for their delay or denial
They are refusing to cite the policy language behind their decision
You are receiving contradictory or vague communication
You do not need to prove they acted maliciously — just that they handled your claim unreasonably or without proper justification.
4.
What might I Recover in a Bad Faith Lawsuit?
If a court agrees your insurer acted in bad faith, you may be entitled to:
The full amount of your original claim
Interest on delayed payments
Emotional distress damages
Punitive damages (if the conduct was especially egregious)
Attorney’s fees and court costs
5.
How to Protect Yourself from the Start
Keep copies of your full policy and all correspondence
Stay organized and submit documentation promptly
Don’t rely solely on phone calls — confirm everything by email
Keep a claim log with dates, names, and summaries of all communications
Request a full written explanation for every denial or offer
Push back respectfully and ask to escalate when needed
For a full guide to battling insurance, click here.
6.
What Do I do If I Suspect Bad Faith?
Get everything in writing — including denials, delays, and settlement offers
Keep a claim log with dates, names, and summaries of all communications
Request a full written explanation for every denial or offer
File a complaint with the California Department of Insurance (insurance.ca.gov)
Consult an insurance attorney — many offer free consultations
7.
Things to Consider Before Pursuing a Bad Faith Claim
Filing a bad faith lawsuit changes the dynamic between you and your insurer - it moves your claim from negotiation to legal confrontation. Before you act:
Make sure you’ve exhausted internal escalation options (supervisor reviews, written complaints)
Double-check that you’ve met your documentation responsibilities
Consider whether the delays or denials could be due to misunderstanding vs. misconduct
Know that lawsuits take time, emotional energy, and can stall the remainder of your claim while it’s in dispute
A bad faith claim is serious. If you believe you're at that point, consult with a qualified insurance attorney to weigh your options.
Tips
Be Realistic
Sadly, it’s not illegal to be super difficult. Don’t be misled by an attorney who bluffs about how likely you are to win a settlement.
Call Backup
If you’re hitting an insurance wall, consider some of these backup options before suing:
File a Department Of Insurance complaint
See if Tugboat Claims free service can help
See if Emergency Legal Responders or Legal Aid can help
Explore the United Policyholders library
Find A Lawyer Who Will Work On Contingency
It’s worth a try!
The Bottom Line
Your insurer is not allowed to delay, deny, or underpay your claim without a valid reason but you should think of Bad Faith claims as a backup plan.
Before you do anything, gather your documentation and consult an attorney.