Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates. He has also been featured on sites like UpJourney.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that exis...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Apr 23, 2020

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Here's what you need to know...

  • Bad faith is a scenario in which one party does not uphold the contract, thus “injuring” the other party
  • When you make an auto insurance claim against your policy the company has a fiduciary responsibility to thoroughly investigate the circumstances surrounding the claim
  • An insurance company is required to do everything within its power to properly investigate an accident so that you are treated fairly

If you’re one of those unfortunate Americans who has had a bad experience with their auto insurance company, rest assured that you may have recourse by way of suing for bad faith or breach of contract. While these types of cases are hard to prove in

Although these types of cases are hard to prove,  if you have a strong case, you might be able to use the legal system to hold your insurance company accountable.

Your insurance carrier agrees to provide you with certain types and forms of coverage while you agree to pay them a certain amount of money. As with any legally binding contract, if either party violates its terms, he opens himself up to legal action.

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What does the term “bad faith” mean?

 

To understand what bad faith means in a legal sense, understand that when we enter into binding contracts, we are agreeing to do whatever is necessary to fulfill our end of that contract.

Bad faith is a scenario in which one party does not uphold the contract, thus “injuring” the other party. Regarding car insurance, bad faith can be demonstrated in any number of ways; we’ll use accident investigations as an example.

When you make an auto insurance claim against your policy the company has a fiduciary responsibility to thoroughly investigate the circumstances surrounding the claim in order to determine payment.

As the other party in the contract, your insurance company is required to do everything within his power to properly investigate an accident so that you are treated fairly. If they fail to do so, that could be construed by a court as bad faith.

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What is “breach of contract?”

Breach of contract is a lot more black-and-white and much easier to prove in court. Where bad faith requires the best judgment of the court system, breach of contract simply requires the black-and-white text of the agreement.

If your insurance company promises to cover all glass replacement, a failure to do so under any circumstances is a breach of contract.

If we combine our previous examples of accident investigation and full glass coverage, a combination of bad faith and breach of contract might mean an insurance company refuses to pay a glass replacement while assuming, without verifying, that your glass is not really damaged.

How do I sue my auto insurance company for bad faith?

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To begin with, you should hire a lawyer who specializes in these sorts of things. You might want to look for an attorney who charges only if you win your case.

That way, you’re not unnecessarily risking a financial investment. After consulting with your attorney he or she will decide whether you’re not you have a strong enough case to go to court. If so, your lawyer will file the paperwork on your behalf and get the ball rolling.

Since bad faith is somewhat difficult to prove in the courtroom, many insurance companies are more apt to fight it than to settle out of court. It’s imperative that you and your attorney agree that you have a solid case before proceeding to trial.

If you lose, you may be required to pay the attorney’s fees of your insurance company. Furthermore, they will probably drop your coverage as a result of the lawsuit.

If you do win your case, your attorney will subtract his fees from your award. That’s how he gets paid. Depending on the seriousness of the accident and the amount of award you’re seeking, it can be extremely expensive.

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