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Bad Faith Law

Bad faith insurance laws are nearly all state laws (although there are a few federal decisions that are relevant). Each of the 50 states has its own set of statutes that describe the parameters of, for example:

  • What an insurance company can and cannot do in their dealings with consumers/policyholders (marketing, advertising, claims handling, and more)
  • What practices constitute "bad faith" dealings by an insurance company
  • What consumers/insurance policyholders can do when they have been victimized by insurance bad faith
  • Time limits, legal alternatives, damages descriptions

Attorneys with the Right Knowledge

Since every state has unique bad faith insurance laws, it's important that a policyholder who has been "ripped off" by an insurer find the right law firm or attorney for legal representation. The state-specific knowledge and experience is not something that every lawyer has, and this can make a significant difference in the outcome of a bad faith claim.

Some of the differences in the states' bad faith insurance laws involve issues such as:

  • Whether punitive damages can be awarded in a bad faith lawsuit. Punitive damages are levied as a punishment to the defendant for especially bad conduct, and the punitive damages (an amount of money) is in addition to damages that a plaintiff suffered
  • Whether there is a "cap" (a limit) on punitive damages
  • Whether third-party direct action is allowed in a bad faith lawsuit

State Departments of Insurance

In addition, the states each have a Department of Insurance, a state agency whose mission includes protecting consumers from insurance bad faith. Unfortunately, the effectiveness of many Departments of Insurance is rather questionable, and from time to time it's been revealed that the head of a state Department of Insurance has been unduly influenced by the insurance industry. A policyholder's own legal representation has a greater stake in protecting the policyholder than the state Department of Insurance does.

Complaint Ratios

One helpful aspect of many state Departments of Insurance is their websites' publication of "consumer complaint information" and, even more informative, the complaint ratio indexes of insurance companies.

The complaint ratio index can be defined as:

The ratio of the number of complaints a particular insurance company has gotten for a specific line of insurance (for example, life, health, homeowner, vehicle) to the total number of complaints received by all of the insurance companies for the same line of Insurance.

Learn more about bad faith insurance law: Contact our bad faith insurance lawyer in your state and schedule a free consultation.

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