Not all denials are created equal. When an insurer denies a claim without a reasonable basis, delays unreasonably, or fails to properly investigate, it may constitute bad faith. Understanding bad faith can protect your rights and potentially increase the compensation you receive.
What Is Insurance Bad Faith?
Bad faith occurs when an insurer:
- Denies a claim without a reasonable basis
- Fails to conduct a proper investigation
- Unreasonably delays claim processing
- Misrepresents policy provisions
- Fails to communicate denial reasons clearly
- Ignores evidence supporting the claim
- Uses improper claim denial practices systematically
Signs of Potential Bad Faith
- Repeated denials without new or different reasons
- Failure to respond to appeals within required timeframes
- Not providing the clinical criteria used for the denial
- Denying obvious coverage (e.g., emergency care for emergencies)
- Changing the denial reason when one reason is disproven
- Not assigning appropriately credentialed reviewers
Your Options
- File a complaint with your state insurance department
- Document everything — dates, conversations, delayed responses
- Consult an attorney specializing in insurance bad faith
- ERISA limitation: Bad faith damages are limited for employer plans (federal law)
- Non-ERISA plans: State bad faith laws may allow punitive damages
When to Consult a Lawyer
- High-value claim ($10,000+)
- Suspected systematic denial practices
- Insurer violating appeal procedures
- Significant harm from delayed or denied care
- ERISA exhaustion completed without resolution