What Does Bad Faith Mean in Insurance Claims?
Attorney Mark Shirian explains that bad faith arises when an insurance company violates its duty to act fairly with policyholders. Insurers are legally required to promptly investigate claims, evaluate them honestly, and pay valid claims without unreasonable delays. Bad faith occurs when an insurer deliberately denies a valid claim without proper investigation, misinterprets policy language to avoid payment, or makes lowball settlement offers knowing the policyholder is in a vulnerable position.
How Is Bad Faith Different from a Simple Claim Denial?
Not all claim denials amount to bad faith. According to Shirian, a denial based on legitimate policy exclusions is considered contract interpretation, not misconduct. Bad faith, however, involves unreasonable actions—such as ignoring evidence, failing to investigate, or using delay tactics to pressure claimants. It reflects the insurer prioritizing its own financial interests over its duty to the insured. These scenarios often arise in car accident cases where liability is clear, damages are substantial, and coverage limits are not in dispute.
What Red Flags Indicate Insurer Misconduct?
Shirian highlights several warning signs that may signal an insurance company is acting in bad faith. These include:
Repeatedly requesting unnecessary documentation
Frequently changing adjusters to stall progress
Making settlement offers far below the documented damages
Refusing to explain claim denials
Misrepresenting policy terms
Threatening to drop coverage
Ignoring medical evidence or delaying decisions despite clear liability
Long delays, unreturned calls, or months taken to make simple determinations are also strong indicators of insurer misconduct.
Can Policyholders Sue for Bad Faith in New York?
In New York, the ability to sue for bad faith depends on whether the claim is first-party or third-party. Shirian explains that in first-party bad faith cases, where the dispute is with one’s own insurance provider, policyholders may bring direct lawsuits. In third-party cases, involving another person’s insurer, the process is more complex. While statutory and common law remedies exist, the standards and available damages differ depending on the circumstances.
What Damages Are Recoverable in a Bad Faith Claim?
Beyond the original claim value, Shirian notes that policyholders may recover consequential damages caused by delays—such as lost wages, missed medical treatments, or foreclosure. In some cases, courts may award damages for emotional distress and attorney’s fees. When an insurer’s conduct is particularly egregious, punitive damages may also be available.
How Do Attorneys Prove Bad Faith by Insurers?
To establish that a denial or delay was intentional or malicious, attorneys look for patterns and internal evidence. Shirian emphasizes the importance of:
Reviewing internal company communications that show bias or misconduct
Identifying deviations from company guidelines
Highlighting inconsistencies with the insurer’s own expert opinions
Deposing adjusters to uncover quotas or denial incentives
Conducting timeline analyses to demonstrate unreasonable delays
Training manuals or corporate strategies that encourage delay tactics may also serve as powerful evidence in court.
Does Bad Faith Apply Across All Insurance Types?
Shirian confirms that bad faith is not limited to auto insurance. Any insurer—whether providing auto, health, or disability coverage—has a duty of good faith. Auto insurers may lowball property or injury claims, health insurers may deny necessary procedures as “experimental,” and disability insurers may improperly claim an individual is fit to work despite medical evidence. While each type of policy has unique regulations, the overarching duty of good faith applies to all.
What Should Policyholders Do If They Suspect Bad Faith?
For those facing insurer misconduct, Shirian offers practical steps to protect themselves:
Document all communications in writing
Send certified letters confirming phone conversations
Keep a timeline of delays and insurer responses
Retain proof of all documents submitted
Avoid relying on verbal promises
Set clear deadlines in correspondence
Additionally, filing a complaint with the New York Department of Financial Services can put pressure on insurers to act fairly. Most importantly, consulting an attorney early can help policyholders push back against delay tactics and preserve their rights.
Final Advice for Dealing with Insurance Companies
Shirian concludes that persistence and documentation are key when dealing with insurers who may be stalling. Policyholders should leverage the possibility of a bad faith claim as a tool to compel insurers to handle their cases properly. For those struggling with unfair insurance practices, legal counsel can make a significant difference in achieving a fair resolution.