Understanding Insurance Bad Faith
At Mitchell & Danoff Law Firm, Inc we know that when you file a personal injury claim, you expect the insurance company to investigate your claim fairly, evaluate it honestly, and pay what it owes. Unfortunately, that is not always what happens. Insurance companies are businesses, and their profitability depends on paying out as little as possible on claims. While most claims are handled within the bounds of the law, some insurers cross the line into what is legally known as bad faith.
Bad faith occurs when an insurance company unreasonably denies, delays, or underpays a valid claim. Every state imposes a duty of good faith and fair dealing on insurers, requiring them to handle claims honestly and promptly. When an insurer violates this duty, the policyholder or claimant may have grounds for a bad faith lawsuit that can result in damages well beyond the original claim value.
Recognizing bad faith tactics is the first step toward protecting yourself. These tactics are often subtle and designed to discourage claimants from pursuing what they are rightfully owed.
Unreasonable Delays in Processing Claims
One of the most common bad faith tactics is simply dragging out the claims process. Insurers know that injured people often face mounting medical bills, lost income, and financial pressure. By delaying the investigation, requesting redundant documentation, or failing to respond to communications in a timely manner, some insurers hope that claimants will become desperate enough to accept a lowball settlement.
Most states have regulations that set specific timeframes for insurers to acknowledge claims, complete investigations, and issue payments. When an insurer consistently misses these deadlines without a reasonable explanation, it may constitute bad faith. Common delay tactics include repeatedly requesting the same documents, transferring your claim between adjusters, and claiming that additional investigation is needed without specifying what information is actually missing.
If you notice that your claim seems to be going nowhere despite your cooperation, it may be time to document the timeline carefully and consult with an attorney.
Lowball Settlement Offers
Perhaps the most widespread tactic is the initial lowball offer. Shortly after an accident, an insurance adjuster may contact you with a quick settlement that seems generous at first glance. These early offers are almost always far below the true value of a claim, and they are designed to close the case before the full extent of your injuries and damages becomes clear.
Insurers make these offers knowing that many people are unfamiliar with the claims process and do not realize that their injuries may require ongoing treatment. Once you accept a settlement and sign a release, you generally cannot go back and ask for more money, even if your condition worsens significantly.
A related tactic involves undervaluing specific components of your claim. An insurer might acknowledge your medical bills but refuse to compensate for future treatment, pain and suffering, or lost earning capacity. They may apply arbitrary formulas or multipliers that do not reflect the actual impact of your injuries on your life.
Disputing the Severity of Injuries
Insurance companies frequently challenge the nature and severity of a claimant’s injuries, even when medical evidence clearly supports the claim. They may send you to a so-called independent medical examination conducted by a doctor who regularly works for insurance companies and has a financial incentive to minimize your injuries.
Another common approach is hiring medical reviewers to examine your records and produce reports questioning your treating physician’s diagnosis or recommended treatment. These paper reviews are conducted by doctors who never examine you in person, yet their opinions can be used to justify denying coverage for surgeries, therapy, or other necessary care.
Insurers may also seize on gaps in treatment to argue that your injuries are not as serious as claimed. If you missed a few physical therapy appointments because you could not get time off work, the insurer may argue that this proves you were not really hurt. This tactic ignores the many practical reasons people may struggle to attend every recommended appointment.
Surveillance and Social Media Monitoring
Insurance companies increasingly use surveillance and social media monitoring to build cases against claimants. Investigators may follow you, photograph you, or record video of your daily activities, looking for anything that appears inconsistent with your claimed injuries.
Social media has become a goldmine for insurers. A single photograph of you at a family barbecue or a brief video of you playing with your children can be taken out of context and used to suggest that your injuries are exaggerated. Even innocent posts by friends or family members who tag you in photos can be used against you.
This does not mean you should feel like a prisoner. But it does mean you should be thoughtful about what you post online during an active claim and understand that anything visible to the public, or even to friends of friends, may end up in an insurance company’s file.
Misrepresenting Policy Terms and Coverage
Some insurers engage in bad faith by misrepresenting what a policy covers. They may cite exclusions that do not actually apply, misstate coverage limits, or claim that certain types of damages are not covered when they clearly are under the policy language.
This tactic is particularly effective against people who have not read their insurance policies in detail, which is most people. Policy language is dense and technical, and insurers sometimes take advantage of this by offering interpretations that favor their bottom line rather than what the policy actually says.
If an insurer denies your claim based on policy language, it is worth having an attorney review the actual policy. What the adjuster tells you on the phone and what the policy document actually states are sometimes very different things. A Madera, CA personal injury lawyer can review the policy language and determine whether the denial is valid or if the insurance company may still be responsible for coverage.
Your Legal Options When Facing Bad Faith
If you believe an insurance company is acting in bad faith, you have legal options. Most states allow policyholders and claimants to file bad faith lawsuits seeking compensation beyond the original claim amount. Depending on the jurisdiction, you may be entitled to consequential damages caused by the insurer’s conduct, emotional distress damages, attorney’s fees, and in egregious cases, punitive damages designed to punish the insurer and deter future misconduct.
Documentation is critical in bad faith cases. Keep copies of every communication with the insurer, including letters, emails, and notes from phone calls. Record dates, times, and the names of everyone you speak with. Save all medical records, bills, and correspondence from your healthcare providers.
An experienced personal injury attorney can evaluate whether an insurer’s conduct rises to the level of bad faith and help you pursue the appropriate legal remedies. Many attorneys offer free consultations for these types of cases, so there is no financial risk in exploring your options.