What is Bad Faith Insurance?
Updated January 24, 2026
When an insurance company unreasonably denies, delays, or underpays a valid claim, or fails to properly investigate or defend its insured.
Understanding Bad Faith Insurance
Insurance companies have a duty of good faith and fair dealing. Bad faith can include denying claims without investigation, unreasonable delays, lowball settlement offers, or failing to defend policyholders in lawsuits. Victims may recover the original claim amount plus additional damages.
Examples
- 1Denying a valid claim without proper investigation
- 2Unreasonably delaying payment for months
- 3Offering far less than the claim is worth to pressure settlement
Why This Matters in Legal Cases
Bad faith insurance practices can turn a straightforward claim into a costly battle. When an insurance company unreasonably denies, delays, or underpays a claim, the policyholder may be entitled to damages beyond the original claim amount—including consequential damages, emotional distress, and in many states, punitive damages. Recognizing bad faith early allows attorneys to hold insurers accountable and leverage additional damages in negotiations.
Frequently Asked Questions
What are common examples of insurance bad faith?
What damages can I recover in a bad faith insurance case?
Can I sue my own insurance company for bad faith?
Related Terms
Coverage Denial
When an insurance company refuses to pay a claim, asserting that the loss is not covered under the policy terms or that the policy was not in effect.
Uninsured Motorist Coverage
Insurance coverage that protects you if you're injured by a driver who has no liability insurance or insufficient coverage to pay for your damages.
No-Fault Insurance
An auto insurance system where each driver's own insurance pays for their medical expenses and lost wages regardless of who caused the accident.
Total Loss
When a vehicle is damaged to the extent that the cost of repairs exceeds the vehicle's actual cash value, or when the vehicle cannot be safely repaired.
Subrogation
The right of an insurance company to pursue a third party who caused the loss to recover the amount paid on a claim.
For Personal Injury cases
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