How to Spot Bad Faith Insurance Tactics & What to Do

When you purchase an insurance policy, you expect your provider to act in good faith and honor its obligations. Unfortunately, some insurance companies engage in bad faith tactics to delay, underpay, or deny valid claims. Recognizing these tactics can help you protect your rights and take appropriate action.

In this article, we’ll break down common signs of bad faith insurance practices, what to do if you suspect you’re being treated unfairly, and how professional assistance, such as a public adjuster, can help you fight back.

What Is Bad Faith Insurance?

Bad faith insurance occurs when an insurer fails to fulfill its contractual duty by unfairly denying or delaying a valid claim. This can include misleading policyholders, undervaluing damages, or intentionally avoiding payouts. While insurance companies have the right to investigate claims, they must do so in a fair and reasonable manner.

The National Association of Insurance Commissioners (NAIC) (naic.org) provides resources for consumers dealing with unfair insurance practices.

Signs of Bad Faith Insurance Tactics

1. Unreasonable Claim Delays

If your insurance company is taking an excessive amount of time to process your claim without providing a valid reason, this may be a red flag. Delays can be a tactic to frustrate claimants into accepting lower settlements or giving up on their claims altogether.

✔ What to Do: Document every interaction with the insurer, including emails, calls, and letters. Ask for a timeline on claim processing and escalate your complaint if deadlines aren’t met.

2. Denying Claims Without Justification

A legitimate claim should not be denied without a clear explanation. If your insurer refuses to pay and provides vague or no reasoning, they may be acting in bad faith.

✔ What to Do: Request a written explanation for the denial and compare it with your policy terms. If the explanation doesn’t align with your policy coverage, you may need to take further action.

3. Lowball Settlement Offers

Some insurers will offer a settlement far below the actual cost of damages, hoping policyholders will accept it due to financial pressure or frustration.

✔ What to Do: Never accept an offer without reviewing it. Obtain independent estimates for repair or replacement costs. Consulting a public adjuster can help ensure you receive fair compensation.

4. Misrepresenting Policy Terms

If an insurance company falsely claims that your policy does not cover certain damages, they may be misrepresenting the contract to avoid paying out.

✔ What to Do: Review your insurance policy thoroughly. If you believe the company is misrepresenting coverage, consult an expert, such as a public adjuster or insurance attorney.

5. Ignoring or Failing to Communicate

A lack of communication or failure to respond to inquiries is another common bad faith tactic. If an insurer ignores your calls or emails, they may be deliberately delaying the process.

✔ What to Do: Keep records of all communication attempts. If you receive no response within a reasonable time, escalate your complaint to the Texas Department of Insurance (tdi.texas.gov) or another relevant regulatory agency.

6. Failing to Properly Investigate Claims

Insurance companies have a legal obligation to investigate claims fairly. If they fail to send an adjuster, dismiss important evidence, or rush through the process, they may be acting in bad faith.

✔ What to Do: Provide thorough documentation, including photos, receipts, and repair estimates. If necessary, seek a second opinion from a public adjuster.

What to Do If You Suspect Bad Faith Insurance

1. Document Everything

Keeping a detailed record of all interactions, correspondence, and policy details is crucial. This includes:

• Emails and phone call logs

• Claim submissions and responses

• Photos/videos of damages

• Estimates and receipts for repairs

2. Request a Written Explanation

If your claim is denied or delayed, ask for a written explanation detailing the specific policy provisions cited. This forces the insurer to justify its actions.

3. File a Complaint with State Insurance Regulators

If you believe your insurer is acting in bad faith, you can file a complaint with your state’s insurance department. In Texas, you can report issues to the Texas Department of Insurance (TDI).

Other states have similar agencies, and you can find more information through the National Association of Insurance Commissioners (NAIC).

4. Consult a Public Adjuster or Insurance Attorney

If your insurer refuses to act in good faith, hiring a public adjuster or an insurance attorney can help you fight for fair compensation. A licensed public adjuster works independently to assess your damages and negotiate a fair settlement on your behalf.

Final Thoughts

Dealing with insurance companies can be frustrating, but recognizing bad faith tactics and knowing your rights can help you get the compensation you deserve. If you suspect bad faith insurance practices, don’t hesitate to take action—document your case, seek expert advice, and escalate your complaint if necessary.

For professional assistance in handling insurance claims, consider working with a public adjuster to ensure you receive the full payout you’re entitled to.