When Does an Insurance Delay Become a Bad Faith Insurance Claim?

After a loss, you report the claim, submit the paperwork, and wait for the insurance company to respond. Then instead of progress, you get delay after delay. In Alabama, insurers are required to handle claims in good faith, which includes making timely decisions when the information supports payment. While some delay is expected, there is a point where waiting is no longer part of the process and becomes a legal issue. The challenge is recognizing when that shift happens.

Insurance Bad Faith in Alabama

Under Alabama law, insurance companies are required to handle claims in good faith and deal fairly with their policyholders. Bad faith occurs when an insurer denies or fails to pay a valid claim without a legitimate or arguable reason.

Alabama courts often look at whether the insurer had an “arguable or debatable reason” for its decision, because if such a reason exists, a bad faith claim usually does not apply. Alabama recognizes both traditional first-party bad faith claims and “abnormal” bad faith. Although bad faith is most commonly associated with denied claims, Alabama law also considers the insurer’s handling of the claim itself.

When Insurance Delays May Become “Bad Faith”

A delay in claim processing is not bad faith on its own. A delay becomes bad faith when it is so excessive that it essentially becomes a constructive denial. This is when the insurance company doesn't outright issue a claim denial. However, its actions prevent the policyholder from collecting on their claim, which is the equivalent of a denial. There are two critical questions Alabama courts ask in these cases:

1. Is the delay reasonable under the circumstances?
2. Is the insurer acting with a legitimate reason or simply stalling?

Signs an Insurance Delay May Be Bad Faith

When not every delay is bad faith, it’s good for policy holders to know the signs of bad faith. That way, they can act promptly when routine delays become something more. It’s not a good sign if the insurance company makes repeated requests for the same documentation. There is never any progression forward despite continued compliance of providing the requested documents.

A lack of communication or long stretches of unexplained silence are not a good sign. A policyholder should be able to receive updates on the claim in a timely manner.

Alabama considers it a clear sign of bad faith if the insurance company makes a determination without doing any investigation. Similarly, it’s bad faith when the legal liability is clear, and the insurance company is refusing to make payment.

When a delay happens, the insurance company should be able to provide a reason why. If the reason continually changes or is inconsistent, this can be a sign of bad faith.

Why Insurance Companies Delay Claims

Sometimes, there are legitimate reasons for an insurance company to delay a claim. Medical records or property damage may need to be verified, and that can be time consuming. There could be questions about liability. It could take time to determine who is legally responsible for the loss. An insurance company will want to determine this before agreeing to pay out a claim. There may be a dispute about what the policy covers or the amount of coverage. This can delay claim resolution because there cannot be a determination until coverage disputes are resolved.

There are several not legitimate reasons why an insurance company would delay a claim. Delaying the claim can be used to create pressure during settlement negotiations. An insurance company may try to use internal backlogs as an excuse for delays despite taking any real action. The insurance company could deny a claim without doing a proper investigation. This delays the process because the policy holder must file an appeal. The insurance company tries to use a complicated administrative process to dissuade people from further pursuing their claim.

Legal Options if You Suspect Bad Faith Delay

If you suspect that the insurance company’s delays are crossing into bad faith territory, it may be time to take action. Start by gathering as much information as possible to document the situation and the insurance company’s actions. Keep a detailed record of every call, including date, time, who you spoke to, and what was discussed.

Speak with an attorney who can assist with analyzing your documentation to determine if you have a case. They can help you take the next step of filing a lawsuit. Claims can include bad faith and breach of contract. Damages sought in a claim can include contractual damages, consequential damages, and in some situations punitive damages.

Protecting Your Rights Against Unreasonable Delays

Insurance delays are not automatically bad faith. When there is no clear justification for the slowdown and no meaningful movement on a claim, it can raise serious concerns. Jemison & Mendelsohn works with policyholders facing insurance companies that fail to meet those obligations. If your claim has stopped moving or you are receiving inconsistent answers, legal review can help determine whether the delay is lawful or a potential violation of your rights.