Procedure in a Bad Faith Insurance Case

If your insurance company denies your claim for benefits, you may wonder what your options are. You do not have to accept that initial denial as the final answer. As a first step, you may ask a supervisor at the insurance company to review the claim and denial. You can also contact your state’s insurance regulatory agency about the claim, and finally, you can speak to an attorney. If you suspect that the insurance company acted in bad faith in processing or denying your claim, talk to an experienced lawyer about your situation.

Initial Stages — Document Denial of the Claim

Keep notes of every conversation you have with the individual who reviewed the claim, including the person’s name and dates and times of all conversations. In addition, keep copies of all written correspondence with the insurance company regarding your claim. If your claim is denied, request that a supervisor review the claim and denial.

If the insurer does not reverse its denial, consider appealing the denial to your state’s insurance regulatory agency, which is a state office charged with reviewing contested insurance claims. It is possible that, during the course of this review process, your insurer will reconsider the denial of coverage.

Contact an Attorney

If your regulatory appeal is unsuccessful, and you still believe your claim was unfairly denied, discuss your situation with an attorney. The attorney can review your policy and other documentation and correspondence regarding the claim. As a first step, your attorney can write a letter to the claims adjuster and other key personnel that sets forth the applicable provision of your policy, the facts of your situation and why you are entitled to coverage and formally demand payment of the claim. This may trigger closer scrutiny of the claim and may result in payment. If, however, the insurer still refuses to pay, the attorney can initiate a lawsuit.

Initiating a Lawsuit

When drafting the complaint, the plaintiff will need to decide whether it should be filed in state or federal court, and select a forum that will have jurisdiction over the defendant insurance company. The complaint will likely include claims for breach of contract, bad faith, fraud, negligence and, if there is an unfair settlement practices statute in the jurisdiction, a claim for violation of that statute. The complaint should seek payment under the policy and damages for the defendant’s bad faith. Even if insurance company later pays the claim, the plaintiff can still proceed with bad faith claim.


During discovery, your attorney can request that the insurer produce certain documents relevant to the case and answer written questions called interrogatories. Your attorney will also be able to depose (question under oath) the claims adjuster, supervisor and other representatives of the insurer. Probably the most important piece of evidence your attorney will request is the claim file, which contains the insurance adjuster’s notes about your claim. The claims file may contain evidence that the insurer was neglectful or fraudulently handled your claim. In addition, your attorney should request the insurer’s claim manual, which sets forth the insurer’s procedures for processing claims. A claim manual can be invaluable in establishing bad faith, and can help provide evidence that an insurer’s own investigation process was not properly followed.

Trial or Settlement

It is possible that your claims could be settled before trial. Typically, parties will continue to negotiate and discuss settlement throughout the course of the lawsuit. If your case proceeds to trial, the parties will present evidence and arguments and question witnesses. A judge or jury will decide the issues.


If you believe you were wrongfully denied payment on a covered insurance loss, there are certain steps you can take to seek a reversal of that denial before initiating a lawsuit. An experienced insurance lawyer will review your case and take the steps necessary to protect your rights.