Common Examples of Bad Faith Insurance Practices

You expect your insurance company to step up when something goes wrong, not create more problems. Yet many policyholders find themselves facing the same frustrating patterns that show up in examples of bad faith insurance claims. From unexplained denials to endless delays, these issues can leave you stuck and financially exposed. The more you recognize these behaviors for what they are, the better positioned you are to take control of the situation.

Unreasonable Denial of a Valid Claim

An insurance company should only deny claims if there is a legitimate or supportable reason. A bad faith denial ignores clear evidence that supports the claim, which should be approved. Sometimes, an insurance company will rely on inconsistent or weak justifications for the denial.

Failure to Properly Investigate a Claim

Before the insurance company issues a decision, there should be an investigation period. Denying the claim without reviewing all of the information and evidence means the insurance company exhibited bad faith. The review should be unbiased and outcome-driven. It should include documentation like witness statements, export reports, and audio/visual records.

Unreasonable Delays in Claim Handling

Your life is on hold while the insurance company processes your claim. The insurance company has a duty to process claims in a timely manner to avoid additional damages and financial expenses. Taking an excessive amount of time to approve or deny claims is bad faith. Common delay tactics could be repeatedly asking for unnecessary or duplicate information or failing to respond to policyholder communications.

Offering Unreasonably Low Settlements

Insurance companies are notorious for extending low settlement offers. However, there is a difference between a low offer and an unreasonably “lowball” offer. These excessively low offers don’t reflect actual damages and costs suffered. It’s also bad faith if the insurance company extends a low offer and then refuses to negotiate, despite clear evidence of the loss value. The insurance company may attempt to use financial pressure tactics to pressure the policyholder into accepting an unreasonably low offer. A bad faith insurance lawyer can help policyholders identify the difference between normal and bad faith negotiation efforts.

Misrepresenting Policy Terms or Coverage

Policyholders have a right to know the terms of the insurance coverage they have purchased. Insurance companies cannot purposefully provide inaccurate or confusing explanations of the policy coverage. This is especially important for the exclusions or limitations of the policy. These are the terms that explain what the policy will not cover. It’s also bad faith if the insurance company consistently interprets purposefully ambiguous language only in the insurer’s favor.

Refusing to Provide a Clear Explanation for Denial

While they may not be happy to receive a denial, they should be able to understand why the insurance company denied the claim. A claim denial without a written explanation can be a red flag that signals possible bad faith. Additionally, vague, incomplete, or constantly changing reasons for denial can be a sign of bad faith by the insurance company. The insurance company should be able to cite specific policy terms or provisions on which the denial is based.

Shifting Responsibility or “Passing the Claim Around”

Things happen, and the adjuster may change during the course of your insurance claim. However, this can cross the line into bad faith when the adjuster repeatedly changes with no progress on processing the claim. This is typically accompanied by inconsistent communication and repeated restarts to the claim process. Each new adjuster may request resubmission of documents or claim that previously sent documents are lost.

Failure to Settle When Liability Is Clear

It can be a sign of bad faith if the insurance company refuses to resolve your claim despite there being strong evidence of their responsibility to do so. This is more common in liability-related claims, such as a car accident. The insurance company could be aware that it needs to issue payment, yet uses tactics to unreasonably drag out negotiations. Its actions could expose the policyholder to additional financial risks.

Talk to a Bad Faith Insurance Lawyer

Bad faith insurance practices often follow predictable patterns. Recognizing these examples early can make a meaningful difference in how your claim is handled and whether you recover what you are owed. The attorneys at Jemison & Mendelsohn work with Alabama policyholders who are facing these exact situations and know how to hold insurers accountable when they cross the line.

Reach out today for a consultation and take the first step toward protecting your claim.