Bad Faith Indicators (State-Level)

Overview

Bad faith occurs when a carrier unreasonably delays, denies, or underpays a claim without a fair investigation or valid basis. States vary: some allow tort claims with punitive damages, others limit to statutory penalties and fees.

Key Rules & Requirements

• Reasonableness standard: Carriers must have a reasonable basis for denial and communicate it clearly.
• Duty to investigate: Adjusters must conduct a prompt, thorough, and unbiased investigation before deciding.
• Payment of undisputed amounts: Many states treat withholding undisputed benefits as evidence of bad faith.
• Statutory notice/cure: Some jurisdictions require a written notice and opportunity to cure before suing for bad faith.
• Damages: Remedies can include policy benefits, interest, attorneys’ fees, punitive damages, or multiples of the claim.

Step-by-Step Guidance

1. Document delays and decisions: keep dated emails and letters of every request, inspection, and response.
2. Ask for written explanations citing policy language and facts supporting any denial or partial payment.
3. Demand undisputed payment while disputes are resolved.
4. If conduct persists, send a statutory notice of violation (where required) identifying the specific unfair practice.
5. Consider department complaints to create a regulatory record of noncompliance.
6. Consult counsel before suit limitation deadlines to evaluate bad-faith viability.

Required Documentation

• Policy excerpts and the sections cited by the carrier.
• Full claim timeline with dates of notice, inspections, requests, and payments.
• Carrier estimates, denial letters, reservation of rights letters.
• Independent estimates or expert reports showing scope/valuation gaps.
• Evidence of undisputed items withheld (photos, invoices, temporary repairs).
• Any cure notices or regulatory complaints filed.

Common Insurer Tactics

• Delaying decisions by repeatedly requesting already-provided documents.
• Using biased or incomplete inspections to minimize scope.
• Offering low settlements to force litigation despite clear liability.
• Failing to explain depreciation, exclusions, or coverage positions.
• Refusing to pay undisputed portions until the entire dispute is resolved.

Red Flags to Watch For

• No written basis for denial or reduction.
• Contradictory explanations for the same decision.
• Ignoring evidence you provided without addressing it.
• Missed statutory deadlines with no valid reason.
• Retaliation or intimidation after you escalate or complain.

Best Practices for Policyholders

• Keep all communications in writing and recap calls by email.
• Quote the specific state unfair practice statute in follow-ups.
• Separate undisputed amounts and insist they be paid immediately.
• Seek independent experts to challenge incomplete inspections.
• Consult an attorney if deadlines are missed or explanations are unsupported.

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