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How Much Is My Case Worth?PI Lawyer Cost (Contingency)The Claim Process (9 Stages)Personal Injury FAQ (30+)Demand Letter TemplateNegotiate with AdjustersAvg Settlement by InjuryPI Statistics (Citable)Insurance Bad FaithComparative Negligence (50)Find a PI LawyerWC Claim ProcessHow Much Is My WC Case Worth?PI vs Workers' CompPunitive Damages by StateCan I Sue for Pain & Suffering?After a Car Accident: 10 StepsStatute of Limitations (51)Workers' Comp by StateNo-Fault Insurance StatesTypes of PI CasesLegal Glossary (50+)The doctrine that puts insurance carriers on the hook for more than just the policy limit. Bad-faith claims are the most important plaintiff leverage in catastrophic-case settlement negotiation. Here’s how to spot it, document it, and use it.
Reviewed by Leonard Goldberg, Editor · Last updated
When the insurer rejects a within-limits demand and a verdict comes in over the policy limit, the insurer is on the hook for the excess. Most common bad-faith trigger. Requires a clean policy-limit demand letter ("we hereby demand the full $X policy limit") with a reasonable deadline.
Sitting on a claim, not responding, asking for endless documents already provided — these create bad-faith exposure. Many states have specific statutory deadlines (CA Insurance Code §790.03, FL Unfair Claims Practices Act).
Denying coverage based on a flimsy or pretextual policy exclusion. The standard is what a reasonable insurer would do. Pure cherry-picking of the policy to deny a clearly covered claim is classic bad faith.
Refusing to investigate, deposing only the plaintiff (not the insured), ignoring contradictory witness statements. Federal regulations and most state codes require a thorough good-faith investigation.
Telling the claimant the policy doesn't cover what it actually covers. Often documented in recorded statements or emails — discoverable in litigation.
Initial low offers are normal. But if the insurer has the claim valued at $200K internally and offers $30K knowing it's far below, that's actionable in many states.
Bad-faith law is largely state-specific. The states below have the most-developed doctrines and the most claimant-favorable remedies.
| State | Statute / Case Law | Remedies |
|---|---|---|
| California | Cal. Ins. Code §790.03 + Comunale v. Traders & General Ins. (1958) | Excess-of-policy liability + punitive damages + attorney fees (Brandt fees) for first-party claims. |
| Florida | Fla. Stat. §624.155 + §626.9541 | Civil Remedy Notice (CRN) required — 60 days to cure. Excess verdicts above policy limit assignable to plaintiff. |
| Georgia | O.C.G.A. §33-4-6 | 50% bad-faith penalty + attorney fees on first-party claims if insurer fails to pay within 60 days of demand. |
| Texas | Tex. Ins. Code §541 + §542 (Stowers Doctrine for third-party) | Stowers Doctrine: insurer that rejects within-limits demand becomes liable for full verdict. Treble damages possible for knowing violations. |
| New York | Pavia v. State Farm (NY 1993) | Gross-disregard standard for third-party bad faith. Excess judgment recoverable in extracontractual claim. |
| Illinois | 215 ILCS 5/155 | Up to 60% of unpaid claim + attorney fees + costs in unreasonable delay/denial cases. |
When damages clearly exceed the policy, send a written demand for the full policy limit with a reasonable deadline (30 days minimum) and all supporting documentation. This is the trigger document for bad-faith. Demand letter template
Email over phone. If you must call, send a confirming email summarizing. Save voicemails. Save claim notes obtained in discovery — adjuster handwritten notes are the goldmine.
In litigation, the adjuster’s internal claim file is discoverable in most jurisdictions. It often reveals the insurer’s actual valuation, supervisor approvals, and reserve-setting — all powerful bad-faith evidence.
Florida requires a Civil Remedy Notice (CRN) — fail to file and you lose the bad-faith count. Other states have cure-period requirements. State-specific traps can kill otherwise valid bad-faith claims.
Bad-faith law is highly state-specific. An attorney who has tried bad-faith cases in your venue is worth far more than a generalist. The recovery on a successful bad-faith claim often dwarfs the underlying compensatory damages.
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