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What constitutes insurance bad faith?

If you are like most Floridians, you likely have several insurance policies, such as for your car, your home, etc. Naturally you expect your insurance carrier(s) to pay you up to your policy limits if you make a claim. You likewise expect your carrier(s) to defend you if someone sues you and to pay the person if (s)he wins the lawsuit, again up to the limits of your policy.

Unfortunately, however, one or more of your insurance carriers may not pay up and/or properly defend you when the time comes. If this happens, you may be able to sue the company for bad faith.

Insurance company duties

FindLaw explains that when you take out an insurance company and faithfully pay the premiums when due, the company owes several duties to you, including the following:

  • The duty to investigate your claim and the underlying circumstances surrounding it
  • The duty to defend you if someone files a lawsuit against you
  • The duty to settle the claim fairly, whether with you or with someone suing you
  • The duty to compensate you for; i.e., indemnify you against, whatever covered losses you may sustain

Bad faith damages and proof

If you sue your insurance company for bad faith and win, you could collect damages in the amount of as much as three times the amount of your actual loss. You may also be able to collect your attorney’s fees and other legal costs.

To win your bad faith suit, however, you must be able to prove by clear and convincing evidence that your insurance company breached one or more of the duties it owed you. Often plaintiffs win insurance bad faith suits by showing that one or more of the company’s agents or employees deliberately did something adverse to the policyholder’s best interests.

This is general educational information not intended to provide legal advice.

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