What Is Insurance Bad Faith? Understanding Unfair Denials and Delays

When your insurance company doesn’t hold up its end of the bargain, the results can be devastating.

Insurance bad faith happens when an insurer unfairly denies, delays, or mishandles a valid claim, leaving policyholders financially stranded and emotionally drained. These actions go against insurers’ basic duty to act fairly and in good faith.

Whether it’s a lowball settlement offer, a long delay with no clear reason, or outright misrepresenting your policy terms, you deserve better. At SWL Personal Injury Lawyers, we help Missouri people fight against these unfair practices and hold insurance companies accountable.

In this blog, you will learn:

• What constitutes bad faith, and how does Missouri law protect you
• Common tactics used by insurers to deny or delay claims
• Your legal rights and options for pursuing compensation

Let’s take a closer look at how to recognize and respond to insurance bad faith.

Defining Insurance Bad Faith in Missouri

The idea of bad faith in insurance means that an insurance company is not following its duty of good faith if it denies or delays valid claims unfairly. 

In Missouri, this is not just a rule but a law. The law ensures that insurance policies really give policyholders the help they are supposed to get. If the insurer does not act fairly, the policyholder can take legal action under state law.

Missouri laws say that insurers must investigate every claim and handle it carefully, similar to practices in common law jurisdictions. If the insurer does not do this, people harmed by it, including traders, can sue for bad faith. Some clear examples of bad faith are if the insurer lies about what is in the policy, does not check cases well, or rejects a claim for no good reason.

Local courts and rules protect policyholders’ rights. Because of this, people in Missouri who face bad faith can use the law to get justice.

Key Elements That Constitute Bad Faith

Insurance bad faith occurs when an insurer fails to uphold its contractual obligations, including life insurance, leading to harm to the policyholder. Understanding the key elements of bad faith can help policyholders recognize when they might be facing unfair treatment from their insurance company.

• Breach of Contract: A policyholder must demonstrate that the insurer violated the terms of the insurance contract, such as failing to provide coverage or payments owed.
• Tortious Conduct: Bad faith can extend beyond contract issues to torts, where unfair or harmful actions by the insurer cause additional problems for the policyholder.
• Unfair Practices: Insurers may engage in unfair practices, such as delaying claim investigations or disregarding evidence provided by the policyholder, which can negatively impact the insured.
• Consequences for Policyholders: These unfair actions can lead to financial loss and significant stress for policyholders.
• Court Considerations: Courts often assess whether the insurer acted with intent to harm or demonstrated gross negligence in their actions.
• Importance of Proving Bad Faith: Successfully proving bad faith in litigation is crucial, as it allows policyholders to seek compensation beyond their policy limits and potentially receive punitive damages for the insurer’s unfair treatment.

Distinguishing Between First-Party and Third-Party Claims

Understanding first-party and third-party claims helps people know more about insurance claims.

• In a first-party claim, the insured deals with their own insurance company. This can happen when they have to claim insurance for things like property damage or a personal injury. Bad faith comes up here when the first-party insurer refuses to check the first-party claim or gives the insured a very low offer.
• Third-party claims are different. The insurer must deal with a claim made by someone else against their policyholder. Bad faith in this case happens if the adjuster does not try to settle within the policy limits. The insured may have to pay more out of their own pocket if there is a big judgment.

First-party and third-party insurance claims come with their own rules, and established bad faith may be considered an independent tort. Still, bad faith practices can show up in both types of claims. Insurance companies need to be fair in all situations.

Common Examples of Insurance Bad Faith

Real-life examples of bad faith litigation show how insurance companies sometimes try to exploit people with a policy.

Bad faith conduct can happen when they reject a claim for no good reason or make people wait too long, knowing this will stress them out. It is also common for them to offer a very low amount of money to settle, just to pay out less. These are all bad-faith practices used by some insurers.

This kind of behavior goes against the good faith that insurance companies should always show to the policyholder. If they do not look into a claim or try to mislead someone about what their policy really says, it destroys trust between both sides.

Knowing the signs of bad faith can help a policyholder know what to do and how to seek help from the law.

Unjustified Claim Denials

Did your insurer say no to your claim without a good reason?

Unjustified claim denials are a strong sign of bad-faith claims. The most common unfair tricks used by an insurer include:

• Saying policy exclusions are the reason for saying no, even when those rules do not fit your claim.
• Refusing claims by making up fake stories about what happened.
• Not caring about the clear coverage written in your insurance policies.

These actions hurt policyholders a lot. Most do not have the time, money, or help to fight back. The insurer may use these tricks because they think you will not fight. Our skilled attorney can fight back against the adjuster’s refusal. They can help protect your rights and push for you to get the money that should be paid under your policy.

Delays in Payment or Investigation

Have you had to wait too long for your claim to get sorted out?

When insurance companies intentionally slow down investigations or payments, this is a sign of bad faith. These delays are a kind of blockage you might face with some insurance companies. 

Here are a few ways this can happen:

• Not looking at the documents you send in within a normal amount of time.
• Taking a long time to review claims leaves insureds with money problems.
• Keeping the insurance claims process going without giving a real reason.

These delays often make people much more upset over time. Sometimes, judges—including both trial judges and those in other courts—see these delays as a reason to bring a tort claim. If you are a policyholder, you can go after the insurer for money and possibly get punitive damages. 

You have the right to use the law to obtain what you are owed and ensure a fair deal.

Misrepresentation of Policy Terms

Did your insurer get your coverage wrong?

When there is misrepresentation of insurance policies, this is a big warning sign of bad faith. This happens if the insurer does not state the policy terms or exclusions correctly. Some common ways this can happen are:

• Use vague or unclear words to give a reason to deny your claim.
• Leaving out important parts of the policy that provide you with coverage in certain cases.
• Not being honest about how the deductible works or the coverage limits can lead to a breach of contract.

When the insurer does this, it can cost policyholders real money. Courts are likely to punish insurers for this kind of breach of contract, and it lets people sue. Know your insurance policy well if you want to fight against intentional misrepresentation.

It’s good, too, to talk to someone with legal experience if you need extra help.

Legal Obligations of Insurers in Missouri

In Missouri, insurance companies have to follow rules set by the Department of Insurance. 

These rules ask them to follow the covenant of good faith. This means they must deal with claims in a fair way. They need to look at every claim the right way, quickly, and not say no to claims or slow them down for no good reason.

If bad faith actions hurt a policyholder, they can get legal advice and work to hold the insurance company responsible. Missouri laws let victims ask for help, keeping things fair in the insurance industry and helping people trust the system.

Insurance companies in Missouri must treat people right. This helps stop the bad stuff and keeps policyholders safe.

Duty to Act Fairly and Promptly

The insurance industry expects a basic duty of good faith. This means insurers must take care of claims in a timely way. The main parts of this duty are:

• Quickly saying they got the claim and talking to the customer.
• Looking into the claim fully, with no bias and no extra waiting.
• Paying valid claims as promised in the policy limits.

If insurers do not meet these rules, it is unfair, and insureds could face financial problems. Courts often punish this type of action. Doing things on time helps keep policyholders and insurers trusting each other and strengthens the agreement.

Good Faith Standards Under Missouri Law

Missouri law requires insurance companies to act in good faith, especially as of September. These rules say that insurance companies must handle claims fairly and carefully so they do not cause too much harm to people. The Supreme Court has also clarified that insurance companies must be responsible. This is important for fairness in the United States.

Missouri courts require insurance companies to investigate claims properly and resolve them on time. If they do not, policyholders and others can be hurt, and insurance companies can face hefty fines.

By following these rules, the insurance industry and all insurance companies keep their actions honest and fair.

Remedies and Potential Damages for Bad Faith

Victims of bad faith can seek myriad remedies. The following are possible compensation types arranged in a text table:

This layered system of remedies incentivizes fair dealings and enforces accountability amongst insurers.

Types of Compensation Available to Policyholders

Policyholders who deal with bad faith actions can seek various forms of compensation to address their grievances. Below are the types of damages that may be available to them:

• Compensatory Damages: These reimburse policyholders for losses incurred due to the insurer’s wrongful actions.
• Aggravated Damages: If the policyholder experienced emotional distress, they may be eligible for damages that cover harm beyond financial loss.
• Punitive Damages: In cases of serious insurer wrongdoing, courts may impose punitive damages to punish unfair practices and deter future misconduct.

These awards aim to rectify the situation for the insured and reaffirm their rights and protections.

Final Thoughts

Facing insurance bad faith can feel like betrayal, especially when you’ve done everything right and still get denied or delayed without a reason. Unfair treatment by insurers disrupts your finances and adds unnecessary emotional stress during an already difficult time. 

Knowing how to recognize bad faith behavior and understanding your rights under Missouri law gives you the power to respond confidently. Whether it’s a refusal to pay a valid claim, slow investigations, or policy misrepresentations, these actions are not just unethical—they’re legally actionable.

At SWL Personal Injury Lawyers, we are committed to standing up for policyholders who their insurers have wronged. If you believe you’ve been mistreated, don’t wait until it’s too late to act. Call us today at (844) 795-9467 or fill out our online form to schedule your free consultation. We’re here to help you demand the fairness and compensation you’re owed.

Frequently Asked Questions

What are the signs that my insurer is acting in bad faith?

Several red flags may signal bad faith from your insurance company. These include denying your claim without a valid reason, delaying investigations or payments, misrepresenting policy terms, or failing to communicate clearly and promptly.

Can I sue my insurance company for bad faith in Missouri?

Yes, Missouri law allows policyholders to file a bad faith tort claim if an insurance company acts unfairly or violates its duty of good faith. This could include intentionally mishandling claims or refusing to pay what’s owed. Filing a lawsuit requires clear evidence of the insurer’s misconduct. You can read more under the Missouri Revised Statutes – § 375.420, which outlines penalties for vexatious refusal to pay claims.

What damages can I recover from a bad-faith lawsuit?

If your insurer acted in bad faith, you may be entitled to compensatory damages (for financial losses), punitive damages (to punish wrongdoing), and possibly emotional distress damages for mental suffering. These damages go beyond the original value of your claim and are designed to hold the insurer accountable for unfair treatment and misconduct.

Is there a time limit to file a bad faith claim in Missouri?

Yes, you must file a bad faith claim within five years in Missouri, according to RSMo § 516.120. But waiting too long can hurt your case. It’s best to speak with an attorney when you suspect bad faith, so you don’t miss critical deadlines and can gather strong evidence early on.

Do I need a lawyer to handle an insurance bad faith case?

Absolutely. Insurance bad faith cases can be complex and require detailed legal knowledge. Our experienced attorney can analyze your policy, gather evidence of misconduct, negotiate with the insurer, and fight for the compensation you’re owed. Having legal support not only strengthens your case, it also ensures you’re treated fairly throughout the process.