You pay your insurance premiums faithfully every month, trusting that when you need your coverage, your insurance company will be there for you. But what happens when the insurance company refuses to pay a legitimate claim, delays the process unreasonably, or offers far less than your claim is worth? This is known as insurance bad faith, and it is more common than most people realize.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company fails to fulfill its contractual obligations to a policyholder or claimant in an unreasonable manner. Insurance companies have a duty of good faith and fair dealing, which means they must investigate claims promptly and thoroughly, make fair and reasonable settlement offers based on the evidence, communicate honestly with the policyholder, provide a valid reason for denying a claim, and process claims within a reasonable timeframe.

When an insurance company violates this duty, the policyholder may have grounds for a bad faith claim in addition to the underlying insurance claim.

Common Examples of Bad Faith

  • Unreasonable claim denial: Denying a legitimate claim without a valid reason or without conducting a proper investigation.
  • Lowball offers: Offering significantly less than the claim is clearly worth in an attempt to force a settlement.
  • Unnecessary delays: Failing to process a claim within a reasonable timeframe, often as a pressure tactic.
  • Failure to investigate: Failing to conduct a thorough investigation of the claim before making a coverage determination.
  • Misrepresenting policy terms: Telling the policyholder that their policy does not cover a loss when it actually does.
  • Threatening the policyholder: Using intimidation or threats to discourage the policyholder from pursuing their claim.
  • Requiring unreasonable documentation: Demanding excessive or irrelevant documentation as a stalling tactic.

Bad Faith Laws in NC, SC, and GA

Each state has its own laws governing insurance bad faith:

In North Carolina, bad faith claims against insurance companies can be pursued under the Unfair and Deceptive Trade Practices Act (N.C.G.S. section 75-1.1), which can allow for treble damages, meaning the court can award up to three times the actual damages.

In South Carolina, the state recognizes both first-party and third-party bad faith claims. Successful claimants may recover actual damages, consequential damages, and in some cases, punitive damages.

In Georgia, insurers who deny claims in bad faith may be liable for a penalty of up to 50 percent of the claim amount plus reasonable attorney fees under O.C.G.A. section 33-4-6.

Proving Bad Faith

To succeed in a bad faith claim, you generally must show that the insurance company owed you a duty to process your claim fairly, the insurer breached that duty by acting unreasonably, you suffered damages as a result, and the insurer's conduct was not merely a mistake but reflected a pattern of unreasonable behavior or a deliberate decision to prioritize profits over its obligations.

Contact Dr. Ted Injury Law

If you believe your insurance company is acting in bad faith, do not accept their unfair treatment. Contact Dr. Ted Injury Law at (800) 555-HURT for a free consultation. Our attorneys have extensive experience holding insurance companies accountable.