What is Bad Faith for an Insurance Company?

March 17, 2020 | Attorney, Matthew Dolman
What is Bad Faith for an Insurance Company?

Defining Insurance company Bad Faith

In almost all personal injury cases, the insurance company holds the purse strings when it comes to settlement. Every insurance contract contains an implied covenant of good faith and fair dealing.1 When an individual or entity signs up for insurance coverage, the purpose of the coverage is to provide compensation when the unexpected happens, including situations when the covered individual or entity is negligent.

Whatever the circumstance, when the insurance company refuses to pay or defend a claim in bad faith, or if the insurance company unreasonably delays payment on a claim, the covered individual may have a cause of action directly against the insurance company over and above the insurance policy limit. In other words, there are no limits on a bad faith insurance claim, even if the value of a particular claim exceeds the limits of the subject insurance policy. Find out what is bad faith for an insurance company and how to protect yourself. 

Why do Insurance Companies Commit Bad Faith

Insurance companies have many reasons for denying insurance claims and/or refusing to pay or defend claims. In many cases, the insurance company is simply trying to save itself money. It is important to remember that an insurance company's main goal is to pay out as little money as possible in satisfaction of a personal injury claim. If the insurance company can avoid paying anything on a claim (or very little), it will be able to keep that money in-house to distribute to its shareholders.

If you believe you may have a claim for bad faith against your insurance company stemming from a motor vehicle accident, our experienced personal injury attorneys are ready and willing to assist you with filing your claim. Our experienced attorneys understand the ins and outs of dealing with insurance companies and their adjusters and are familiar with the arguments insurance companies oftentimes assert when they deny claims or refuse to pay or defend them. Our experienced attorneys can review the facts and circumstances of your case, as well as the reasons for the insurance company's decision, and may be able to file a bad faith insurance claim on your behalf.

Good Faith Versus Bad Faith Insurance Practices

Every insurance policy contains an implied covenant of good faith and fair dealings. As such, an insurance company has an implied duty to do the following when the unexpected happens and a claim is presented under the policy:

  • Evaluate the claim fairly and honestly.
  • Settle any claims the have been filed against the covered individual if it can be done within the available coverage limit of the policy. Many insurance policies have bodily injury coverage limits of $30,000.00 or $100,000.00.

Bad faith on the part of an insurance company may include some or all of the following:

  • Denying a claim outright – or failing to pay or settle a claim that falls within the insurance policy's limits, without asserting a reasonable basis
  • Failing to promptly investigate a claim for insurance coverage
  • Failing to properly investigate and/or a defend a claim for insurance coverage
  • Failing to provide a valid reason or justification for denying an insurance claim
  • Using deceptive practices to deny an insurance claim
  • Misrepresenting the terms of coverage or engaging in other misrepresentations, for the sole purpose of wrongfully denying an insurance claim
  • Failing to offer the full monetary value for the claim (i.e. undervaluing the claim) or offering a low amount insufficient to compensate a personal injury plaintiff for the injuries and damages sustained

Legal Basis for a Bad Faith Claim Against an Insurance Company

The common law legal basis for a bad faith insurance claim is breach of contract. In other words, the covered individual is alleging that the insurance company breached the insurance policy's implied covenant of good faith and fair dealings when it denied coverage, refused to pay an insurance claim, or undervalued the claim. A claim for bad faith insurance practices also exists under the Florida statutes.2

Third-party Claims for Bad Faith Against Insurance Companies

One type of bad faith claim against an insurance company is a third-party claim. A third-party bad faith claim arises when an insurer fails to defend or pay a valid claim which has been brought against a covered individual by an injured plaintiff. In that case, the covered individual could bring a bad faith insurance claim directly against his or her own insurance company.

First-party Bad Faith Claims Against Insurance Companies

First-party bad faith claims against insurance companies are typically brought by injured plaintiffs in the personal injury context. A first-party bad faith claim provides a basis for injured plaintiffs with uninsured (or underinsured) motorist coverage to sue their own insurance companies when the value of their injuries and damages exceeds the liability policy limits (or in cases where the driver who caused the motor vehicle accident was uninsured or underinsured).

In order to make a claim against your own insurance company for uninsured motorist coverage (UM) or underinsured motorist coverage (UIM), all other available policies of insurance must first be exhausted. For example, if the driver who caused the accident had a $30,000.00 liability policy of insurance and the injured plaintiff had a UM/UIM insurance policy with a limit of $100,000.00, the $30,000.00 liability policy would first need to be exhausted before turning to the $100,000.00 UM/UIM policy.

On the other hand, if the driver who caused the motor vehicle accident was uninsured, you may be able to file an uninsured motorist (UM) claim or lawsuit directly against your own insurance company from the start, in order to compensate you for your bodily injuries and damages.

Contact a Clearwater Personal Injury Attorney Today to Discuss Your Bad Faith Insurance Claim

Insurance companies improperly deny and/or refuse to pay valid insurance claims all the time. When this happens, you need experienced legal representation throughout your case.

Our experienced Clearwater personal injury attorneys will be able to evaluate the basis for you bad faith claim against the insurance company and may be able to assist you with filing a lawsuit, if necessary. We may also be able to assist you with settling your bad faith insurance claim or represent you in court, if necessary.

To schedule a free case evaluation with one of our lawyers, call the Dolman Law Group Accident Injury Lawyers, PA today at 727-451-6900 or send us an email through our online contact form.

Dolman Law Group Accident Injury Lawyers, PA 800 North Belcher Road Clearwater, Florida 33765 727-451-6900 https://www.dolmanlaw.com/insurance-claims-lawyer/





Matthew Dolman

Personal Injury Lawyer

This article was written and reviewed by Matthew Dolman. Matt has been a practicing civil trial, personal injury, products liability, and mass tort lawyer since 2004. He has successfully fought for more than 11,000 injured clients and acted as lead counsel in more than 1,000 lawsuits. Always on the cutting edge of personal injury law, Matt is actively engaged in complex legal matters, including Suboxone, AFFF, and Ozempic lawsuits.  Matt is a lifetime member of the Million Dollar Advocates Forum and Multi-Million Dollar Advocates Forum for resolving individual cases in excess of $1 million and $2 million, respectively. He has also been selected by his colleagues as a Florida Superlawyer and as a member of Florida’s Legal Elite on multiple occasions. Further, Matt has been quoted in the media numerous times and is a sought-after speaker on a variety of legal issues and topics.

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