When an insurer fails to handle a claim fairly and in good faith, policyholders may have legal remedies.
What Is Insurance Bad Faith?
Insurance policies are contracts. Under the law in many states, insurers owe their policyholders a duty of good faith and fair dealing. This generally requires insurers to:
- Promptly investigate claims
- Evaluate claims objectively
- Communicate clearly and honestly
- Avoid unreasonable delays
- Pay covered claims within required timeframes
Bad faith may occur when an insurer’s conduct goes beyond a simple coverage dispute and becomes unreasonable, deceptive, or intentionally obstructive.
Common Red Flags in Property Claims
Policyholders sometimes report:
- Repeated document requests with no clear explanation
- Long periods of silence after submitting required information
- Sudden coverage reversals after initial approval
- Lowball estimates that do not reflect actual repair costs
- Denials based on strained or technical policy interpretations
- Pressure to accept reduced settlements
Not every delay or denial constitutes bad faith. However, when a pattern of unreasonable conduct emerges, legal review may be warranted.
Types of Property Claims Involved
Bad faith issues can arise in claims involving:
- Residential fire damage
- Wind and hail damage
- Hurricane and flood-related losses
- Water damage and mold claims
- Business interruption losses
- Commercial property damage
In major disaster events, disputes over valuation, depreciation, and causation frequently arise.
What Damages May Be Available?
In many jurisdictions, if bad faith is proven, policyholders may be entitled to recover:
- The full amount owed under the policy
- Consequential damages caused by delay
- Interest and attorneys’ fees
- In certain cases, statutory penalties or punitive damages
The availability of these remedies depends on state law and the specific facts of the claim.
First-Party vs. Third-Party Bad Faith
Property claims typically involve first-party coverage, where the insured seeks payment under their own policy. The standards and legal frameworks governing first-party bad faith vary by state.
Because these claims are fact-specific, early review of the policy language and claim history is critical.
Steps Policyholders Should Consider
If you believe your property claim is being mishandled:
- Keep written records of all communications
- Retain copies of estimates and reports
- Document property damage thoroughly
- Request written explanations for denials
- Review the policy language carefully
Seeking experienced counsel can help determine whether the insurer’s conduct crosses the line into bad faith.
We Monitor Patterns of Claims Practices
Insurance bad-faith cases often reveal broader claims-handling practices that affect multiple policyholders. When appropriate, legal action can promote accountability and ensure insurers comply with their contractual and statutory obligations.
Disclaimer: The information provided in this blog post is for general informational purposes only and does not constitute legal advice. Reading this post does not create an attorney-client relationship between you and Sauder Schelkopf. Laws vary by jurisdiction, and the application of law depends on individual circumstances. You should not act or rely on any information in this post without seeking professional legal counsel. If you need legal assistance, please contact a qualified attorney to discuss your specific situation.