Insurance Bad Faith: Signs, Your Rights and What to Do

Insurance bad faith generally means your insurance company handled your claim unreasonably, not just that you disagree with its decision. Common signs include long delays with no explanation, misstating what your policy says, lowball offers that ignore your evidence, or denying a claim without a real investigation.

Every state handles bad faith differently. Some let you sue under a statute, some rely on court-made law, and some offer only limited remedies. This guide covers the warning signs, the protections that exist, and the practical steps you can take. It is not legal advice.

What does "bad faith" mean?

When you buy insurance, the insurer promises to handle your claim fairly. United Policyholders ↗, a national nonprofit for policyholders, puts it plainly: "'Bad faith' conduct is 'unreasonable' conduct."

That matters, because an insurer can deny or underpay a claim without acting in bad faith. An honest mistake or a real disagreement over facts is not automatically bad faith. Florida's law, for example, says "mere negligence alone is insufficient to constitute bad faith" (Fla. Stat. 624.155 ↗).

Common signs of insurance bad faith

Many states list "unfair claim settlement practices" in their laws. Texas, for example, names these as unfair settlement practices (Tex. Ins. Code s. 541.060 ↗):

• Misrepresenting a material fact or policy provision about your coverage.
• Not trying in good faith to make a "prompt, fair, and equitable settlement" once liability is "reasonably clear."
• Not explaining the basis in the policy for a denial or a compromise offer.
• Not confirming or denying coverage within a reasonable time.
• Refusing to pay without a reasonable investigation.
• Demanding a full release when only part of the claim has been paid, unless it's a compromise of a disputed claim.

California's claims rules add other examples. Insurers there may not make a settlement offer that is "unreasonably low," must run a "thorough, fair and objective investigation," and may not require you to drop a Department of Insurance complaint to get your claim settled (10 CCR 2695.7 ↗).

Other patterns worth tracking in your records:

• Your adjuster keeps changing, and no one seems to know your file.
• The insurer keeps asking for the same documents.
• Calls and emails go unanswered for weeks.
• Promises made on the phone never show up in writing.

One of these alone doesn't prove bad faith. A pattern, backed by records, is what an attorney or regulator will want to see. If your main problem is slow handling, see our guide on what to do when an insurance claim is delayed.

Consumer protections that may apply

State claim-handling laws

Most states set rules for how fast insurers must respond and how they must explain decisions. A regulator can enforce these rules. Check your state's page for local deadlines.

A right to sue (in some states)

Whether you can sue for bad faith, and what you can recover, depends on your state. A few examples:

• Texas lets a person who suffers actual damages from an unfair practice sue for those damages, court costs and attorney's fees. If the insurer acted "knowingly," a court may award up to three times actual damages. You generally must give written notice at least 61 days before filing (Tex. Ins. Code ch. 541 ↗). See our Texas page.
• Florida requires a 60-day written notice, called a civil remedy notice, filed with the state and the insurer before you can sue under its bad-faith statute. If the insurer pays the damages or fixes the problem within those 60 days, no lawsuit lies. The notice can't be filed within 60 days after appraisal is invoked on a residential property claim (Fla. Stat. 624.155 ↗). See our Florida page.
• Georgia, according to United Policyholders ↗, requires you to show the claim was covered, the insurer refused to pay within 60 days of a demand made before suit, and the refusal was motivated by bad faith.

Other states use different tests or offer fewer remedies. That's why a local attorney matters.

No retaliation for complaining

The NAIC ↗ says "an insurer cannot discriminate against you in the future for filing a complaint." United Policyholders says the same about California (source ↗).

What you can do if you suspect bad faith

1. Document everything

United Policyholders recommends a claim diary that records "everything that's happened between you and the insurance company" (source ↗). Keep:

• Every letter, email and text.
• A call log: date, time, who you spoke to, what they said.
• Photos, videos, estimates and receipts.
• Copies of every form you send, and proof of when it was sent.

2. Put your concerns in writing

After any phone call, send a short email confirming what was said. When you write to the insurer, United Policyholders advises: "Always put a reasonable deadline in the letter that tells the insurance company when you expect a reply" (source ↗).

Ask the insurer to explain, in writing, the policy language behind any denial or low offer. Stick to facts. Your letters may later be read by a regulator or a judge.

3. Go up the chain

United Policyholders suggests writing to "your adjusters' supervisors, their supervisors, and even the President or CEO of the insurance company" (source ↗).

4. File a complaint with your state insurance department

It's free. The NAIC ↗ says your department can investigate issues like "unfair claim delays or denials" and "violations of state insurance laws." If it finds the insurer acted improperly, it can require the company to fix the problem.

Know the limits. The Texas Department of Insurance ↗ says it can't make a company pay unless not paying breaks the law or your policy, and it can't settle disputes over facts, like whether storm damage or wear and tear caused a problem. See our guide on how to file a complaint with your department of insurance.

5. Talk to an attorney

A complaint is not a lawsuit. If you believe the insurer acted in bad faith, talk to a licensed attorney who represents policyholders. United Policyholders advises consulting an attorney before the one-year anniversary of your loss to learn your filing deadline (source ↗). Lawsuit deadlines can be short. California's standard fire policy, for example, generally requires suit within 12 months of the loss, or 24 months for losses tied to a declared state of emergency (Cal. Ins. Code s. 2071 ↗).

Ask how an attorney charges before you hire them.

Where a public adjuster fits

A public adjuster is not a lawyer and can't file a bad-faith lawsuit or give legal advice. What a licensed public adjuster can do is document your loss, prepare a detailed estimate and handle negotiations with the insurer. That can help when the problem is mostly about the amount of the claim.

If the insurer won't respond, a public adjuster can also build the paper trail you'd need later. If you're facing a legal fight, see public adjuster vs. attorney to decide who to call. Their fee is usually a percentage of the claim, so it may not be worth it for small claims.

If your claim is large and the insurer won't pay a fair amount, get matched with a licensed public adjuster for a free review.

This guide is general information, not legal advice. Bad-faith laws, notice rules and deadlines vary by state. Talk to a licensed attorney about your situation.

Frequently asked questions

Is a denied claim automatically bad faith?

No. An insurer can deny a claim for legitimate reasons. Bad faith is about unreasonable conduct, such as denying without a real investigation or misrepresenting your policy.

How do I prove insurance bad faith?

Through records: letters, emails, call logs, estimates and the insurer's own explanations. What you must prove depends on your state's law, so ask an attorney.

Can my state insurance department make my insurer pay?

Sometimes, if not paying breaks the law or your policy. Regulators generally can't resolve factual disputes or act as your lawyer.

Will filing a complaint hurt my claim?

The NAIC says insurers cannot discriminate against you for filing a complaint. California's rules also bar insurers from requiring you to withdraw a complaint to settle a claim.

Is there a deadline to sue for bad faith?

Yes, and it varies by state and policy. Some states, like Texas and Florida, also require written notice before you sue. Talk to an attorney early.

Can a public adjuster handle a bad-faith claim?

No. A public adjuster can help with the claim itself, but only an attorney can bring a bad-faith lawsuit or give legal advice.