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How to File a Bad-Faith Claim against Your Insurance Company

If you think your insurance company did you wrong, don't sit and stew -- fight back! Here's how.


  • TIP: Many insurance lawyers work on a contingency basis, meaning you only have to pay them if you win your case, at which time they take a previously agreed upon percentage of the settlement, usually about 30 percent.
  • Step 1: Keep meticulous records of every telephone call, e-mail, and letter between you and your insurance company to document how the insurer's bad-faith behavior has adversely affected you. In some states, you can be awarded punitive damages. And if the judge wants to send a message to your insurer that bad-faith negotiating won't be tolerated, those awards can be substantial.
  • FACT: A Boulder, Colorado jury awarded $37 million to a mother of four in a bad-faith lawsuit concerning her health insurance company's refusal to pay medical bills after she was severely injured in a 2005 car accident.
  • Step 2: If the compensation you're seeking exceeds small claims court limits, consult an attorney who specializes in insurance law, bearing in mind that not all states allow you to recover attorney's fees.
  • Step 3: If letters don't lead to a resolution of your case, and the amount you're seeking to recover is within your state's small claims court limit, file a bad-faith claim there. It's not unheard of for an insurance company not to bother sending a representative to the hearing, in which case you'll win by default.
  • Step 4: Know if you have a case. Examples of insurers acting in bad faith include failing to promptly and thoroughly investigate a claim, unreasonably delaying payment, unreasonably denying benefits, and refusing to fully reimburse.
  • Step 5: If you believe your insurer has acted in bad faith, begin by sending a letter to your insurance company's Director of Claims explaining why you feel your claim was not handled properly. Send another letter to the Commissioner of the Department of Insurance in your state and request a review of your case.
  • TIP: Send both letters certified mail, return receipt requested.
  • Step 6: Know what a bad-faith claim is: an assertion that an insurance company is unreasonably withholding policy benefits. You can file a bad-faith claim yourself, or hire an attorney to do it for you.

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