This page was written, edited, reviewed & approved by Ruben Davidoff following our comprehensive editorial guidelines Ruben Davidoff ,the Founding Partner, has 30+ years of legal experience as a New York personal injury attorney.
Bad-faith claims arise when an insurance company fails to honor its duty to treat policyholders fairly under the terms of their policy. Every year, state regulators receive thousands of insurance complaints about delayed payments, underpaid valid claims, and wrongful denials of claims. The National Association of Insurance Commissioners (NAIC) tracks these complaints nationwide, revealing persistent patterns of insurer misconduct across all policy types. These bad faith practices cost policyholders billions and leave injured people without the compensation they need to recover.
Table of Contents
The financial impact is greatest when an insurer refuses to pay a legitimate claim or delays the claims process to pressure victims into accepting less. At Davidoff Law, we hold insurance companies accountable when they violate their obligation to act in good faith and fair dealing.
What Are Bad Faith Claims Against an Insurance Company?
Bad faith claims are legal actions a policyholder can bring when an insurance company acts in ways that violate its duty of good faith and fair dealing. Every insurance contract carries an implied obligation that both parties will deal with each other honestly. When an insurance company violates this duty — by denying a valid claim without a reasonable basis, refusing to investigate, or misrepresenting policy language — that conduct may constitute bad faith.
A policyholder has the right to expect fair treatment throughout the claims process. The insurer must review each potentially covered claim with honesty, communicate its decisions, and pay what the policy requires. When the insurance company fails to meet these standards, the insured may sue for damages exceeding the original policy limits. At Davidoff Law, we help clients identify bad-faith insurance tactics and pursue legal action to protect their rights.
Understanding Insurance Bad Faith and Policy Terms
The terms of your insurance policy define what your insurer owes you and when coverage applies. Understanding these policy terms is the first step in determining whether your insurance company's conduct crosses the line into bad faith. Insurance bad faith falls into two categories based on the parties' relationship.
First Party Bad Faith Insurance Claims
First-party bad faith occurs when your own insurer refuses to honor a legitimate claim under your policy. In these cases, the policyholder files a claim with their insurance company for a covered loss—such as property damage or medical expenses—and the insurer fails to pay. First-party bad faith includes denying coverage without a reasonable basis, delaying payment, or offering far less than the claim is worth. This is particularly harmful in no-fault insurance claims, where injured motorists rely on their insurer for timely coverage of medical expenses.
Third-Party Bad Faith Claims and Liability Disputes
Third-party bad faith occurs when a liability insurer fails to protect the insured in a third-party claim. In a third-party context, the insurer has a duty to defend the policyholder and settle claims within policy limits when appropriate.
Third-party claims arise when the liability insurer refuses a reasonable settlement offer, exposing the insured to a judgment exceeding their coverage limits. This failure to accept a fair settlement in a third-party bad-faith situation can leave the policyholder liable for damages they should never have to pay.
Common Examples of Insurance Bad Faith Practices
Insurance bad faith takes many forms, but certain patterns recur in the cases we handle. Recognizing these common examples helps you spot trouble early and protect your rights. Below are the bad faith practices we see most often:
- Delayed investigation: The insurance company stalls the claims process or refuses to investigate your claim within a reasonable time frame.
- Denying a valid claim without reason: The insurer rejects a legitimate claim without providing a reasonable basis or ignores evidence that supports coverage.
- Misrepresenting policy terms: The insurance company twists policy language to avoid paying a potentially covered claim.
- Failing to communicate: The insurer ignores calls, letters, or requests for updates on your policyholder's claim.
- Refusing a reasonable settlement: The insurance company rejects a reasonable settlement offer or makes unreasonable demands before agreeing to pay.
Each of these tactics can constitute bad faith under New York Insurance Law §2601, which defines unfair claim settlement practices. If you recognize any of these patterns, you may have grounds to file a bad faith lawsuit against your insurer.
Lowball Settlement Offers and Unreasonable Delays
A lowball settlement is one of the most common tools insurance companies use to avoid paying the true value of a claim. The insurer makes a settlement offer far below what the evidence supports, hoping financial pressure will force you to accept. Many policyholders accept these offers because they need money to cover medical bills, property damage, or lost income and cannot afford to wait. Understanding whether you have to accept an insurance offer is critical before making any decision.
Unreasonable delay is another tactic that serves the same purpose. The insurance company drags out the claims process for weeks or months, requesting unnecessary documentation and creating roadblocks at every turn. This strategy wears down claimants and pushes them toward accepting less than they deserve. Our attorneys have written extensively about insurance bad faith tactics and how to protect your rights after a car accident. At Davidoff Law, we recognize these tactics and fight back to ensure our clients receive fair payment for every valid claim.
Signs You May Suspect Bad Faith From Your Insurance Company
Knowing when to suspect bad faith can save you from losing the compensation you are owed. The signs are not always obvious, but certain patterns should raise a red flag. Watch for these warning signs during your claims process.
Your insurer stops communicating or takes weeks to return calls and emails. The insurance company changes its reasons for denying your claim each time you challenge the decision. The adjuster ignores evidence you submit that supports your policyholder's claim. The insurer demands excessive or unnecessary documentation that has no connection to your coverage. If you notice any of these behaviors, your insurance company may be acting in bad faith, and you should explore your legal options with an experienced personal injury attorney.
Legal Options If You Believe You Have a Bad Faith Claim
If you suspect bad faith from your insurance company, you have legal remedies available to hold them accountable. The right course of action depends on the facts of your case, the type of insurance involved, and the severity of the insurer's conduct. An experienced attorney can evaluate your situation and guide you toward the best path forward.
Filing a Bad Faith Lawsuit
You can file a bad-faith lawsuit against your insurance company in the superior court or the appropriate civil court. You may also file a formal complaint with the New York Department of Financial Services (DFS), the state agency that oversees insurance company conduct. This legal action seeks damages beyond what the original policy would have paid. If the court finds that the insurer acted in bad faith, you may recover the full value of your claim plus additional compensation for the harm the insurer's conduct caused.
Recovering Damages Beyond the Original Valid Claim
A successful bad-faith claim can result in damages that far exceed the original policy limits. Courts may award damages for emotional distress caused by an insurer's bad-faith practices. You can also recover the attorney's fees spent fighting the insurance company. In cases of extreme or willful bad faith, courts may impose punitive damages to punish the insurer and deter similar conduct in the future.
Proving Bad Faith Insurance in Court
Proving bad faith insurance requires strong evidence that the insurer failed to meet its duty to act in good faith. The policyholder bears the burden of showing that the insurer had no reasonable basis for its conduct. This means you need documentation of every interaction, denial, delay, and communication with your insurer throughout the claims process.
Key evidence includes denial letters, internal claim notes, correspondence between you and the adjuster, and proof that you submitted all required information. Expert testimony may also support your case by showing that the insurer's conduct fell below industry standards. The American Bar Association publishes resources on insurance litigation standards that help frame what constitutes reasonable insurer behavior. Courts evaluate whether a reasonable insurer would have handled the claim the same way. At Davidoff Law, we build detailed evidence files from day one to give our clients the strongest possible case if litigation becomes necessary.
How Policy Terms Impact Bad Faith Claims
The language of your insurance policy plays a central role in any bad faith claim. Policy terms define what the insurer must cover, what exclusions apply, and how the claims process should work. When an insurance company relies on vague or misleading policy language to deny a legitimate claim, that conduct may constitute bad faith.
New York courts interpret ambiguity in insurance contracts in favor of the policyholder, not the insurer. This means if a policy term can be read in two ways, the court will choose the reading that supports coverage. The insurer's obligation to act in good faith, fairly, and equitably applies to every stage of the claims process—from investigation to payment. Victims dealing with uninsured or underinsured motorist coverage disputes frequently encounter bad-faith tactics when insurers attempt to limit payouts on their policyholders' claims. Understanding your policy terms helps you recognize when your insurance company crosses the line.
How Davidoff Law Helps Clients With Bad Faith Claims
At Davidoff Law, we investigate every aspect of how your insurance company handled your claim. We review your insurance policy, examine every denial letter, and analyze the insurer's conduct throughout the claims process. Our team identifies patterns of bad faith practices that other firms might miss.
When we find evidence that an insurance company acts in bad faith, we take aggressive action on our client's behalf. We negotiate with insurers to secure fair payment and file bad-faith lawsuits when insurers refuse to honor their obligations. Our firm has helped clients across Queens, Brooklyn, the Bronx, Manhattan, and Staten Island recover compensation for wrongful claim denials, unreasonable delays, and lowball settlement tactics. Bad faith denials in wrongful death cases cause particularly devastating financial harm to grieving families, and we pursue these claims aggressively. We work on a contingency fee basis, so you pay nothing unless we win.
Frequently Asked Questions About Bad Faith Claims
Bad faith claims are legal actions against an insurance company that fails to honor its duty of good faith and fair dealing. You can file a bad faith claim when your insurer wrongfully denies, delays, or underpays a valid claim.
Look for patterns such as repeated claim denials without explanation, unreasonable processing delays, or lowball settlement offers. If the insurer ignores evidence, misrepresents your policy terms, or fails to provide a proper legal defense, that conduct may be considered bad faith.
Insurance bad faith occurs when an insurer violates its obligation to act honestly toward the policyholder. This includes denying coverage without a reasonable basis, refusing to investigate, failing to pay a legitimate claim, or neglecting the insurer's duty to defend in a lawsuit.
Yes. If your insurance company violates its duty of good faith and fair dealing, you can file a lawsuit to recover damages. These damages may include the original claim value, emotional distress, attorney's fees, and punitive damages. In some cases, courts may even grant summary judgment if the insurer's bad faith is clear.
A lowball settlement is an offer far below the actual value of your claim. Insurance companies use this tactic to pressure policyholders into accepting less than they deserve, often when the claimant faces mounting bills.
Not always, but an unreasonable delay without explanation can be evidence of bad faith. If the insurer fails to process your claim within a fair time frame or requests unnecessary documentation to stall, you should explore your legal options.
Common examples include denying a valid claim without reason, misrepresenting policy terms, refusing a reasonable settlement offer, delaying the claims process, failing to investigate a potentially covered claim, or neglecting the insurer's duty to provide legal defense.
A valid claim falls within your policy's coverage and is supported by proper documentation and evidence. Your insurer has a duty to review and pay every valid claim under the terms of your insurance contract.
You may recover the original claim amount, compensation for emotional distress, attorney's fees, and, in severe cases, punitive damages. The exact amount depends on the insurer's conduct and the harm you suffered.
Yes. In many bad-faith cases, courts award attorneys' fees to the policyholder. This ensures that fighting the insurance company does not cost you more than the claim is worth.
You can file a complaint with the state insurance regulator, negotiate with the insurer through legal counsel, or file a bad faith lawsuit in court. An experienced attorney can help you understand the difference between first-party and third-party bad faith claims, including those involving personal injury from car accidents, and choose the most effective path based on the facts of your case.
Yes. We review every insurance policy and claim file to determine whether your insurer's conduct crosses the line into bad faith. Contact us for a free case review, and we will evaluate your legal options at no obligation to you.
Speak With a Bad Faith Insurance Lawyer at Davidoff Law for a Free Case Review
Insurance companies collect premiums with the promise that they will pay when you need them most. When they break that promise, you deserve a legal team that will hold them accountable. At Davidoff Law, we fight for policyholders across New York City who face personal injury claims, wrongful claim denials, unreasonable delays, and bad-faith insurance practices that cost them the compensation they earned.
We offer a free case review with no obligation. Our team examines your insurance policy, reviews the insurer's conduct, and explains your legal options in plain language. You pay no attorney fees unless we win your case. Call 718-268-8800 or contact us online today to speak with a bad faith insurance lawyer who will defend your rights. Hablamos español y estamos disponibles 24/7.
Ruben Davidoff, founder of Davidoff Law, established his practice in 2012 after moving to Queens in 1988 and beginning his legal career in 1997. Admitted in NY State and the US District Court for the Eastern District of NY, he has extensive experience in personal injury, handling various cases like airline crashes, auto accidents, and slip/trip and fall cases. Mr. Davidoff provides personalized attention, recovering millions for clients through settlements or verdicts, leveraging decades of experience.
