Bad Faith Claims Defined

A bad-faith claim arises when an insurance company fails to honor its obligations to a policyholder in good faith and in a fair manner. When an insurance company acts in ways designed to avoid paying legitimate claims, it may be violating both insurance law and the implied covenant of good faith and fair dealing. That covenant is built into every policy.

At Conboy Law, we represent policyholders who have suffered unfair treatment from insurance carriers. We know how to hold insurers accountable. The National Association of Insurance Commissioners tracks consumer complaints nationwide. Bad-faith insurance disputes consistently rank among the most common and fastest-growing categories of insurance litigation in the United States.

Bad faith is not the same as a simple coverage disagreement. It involves deliberate or unreasonable conduct. That conduct crosses the line from a dispute into a legal violation. Both common law bad faith and statutory bad faith remedies may apply, depending on your state. Understanding the difference is the first step toward taking action.

What Is a Bad Faith Insurance Claim?

Every insurance contract carries an implied covenant of good faith and fair dealing. That covenant requires both parties to act honestly, to deal fairly, and to honor the faith and fair dealing that every insurance policy promises. When an insurer breaches that duty by acting in bad faith, it can give rise to both contract and tort claims depending on the jurisdiction. The sections below explain the most common bad faith insurance practices and the specific tactics insurers use to delay or deny legitimate claims.

Common Bad Faith Insurance Practices Policyholders Should Know

Cornell Law defines bad faith insurance conduct as an insurer's refusal to fulfill its policy obligations without a reasonable basis for doing so. When an insurer unreasonably denies a valid claim or fails to properly investigate before a claim denial, its actions may constitute bad faith under insurance law. The following practices are widely recognized as bad faith behavior, and even a single instance can support a valid bad faith insurance claim:

• Unreasonable denial of a valid claim: The insurance company denies a potentially covered claim without conducting a proper investigation or citing a legitimate policy provision, leaving the insured no proper basis for the decision.
• Unnecessary delays in claim processing: The insurer creates undue delay, leaving policyholders waiting weeks or months without a reasonable basis for the hold, which is a recognized form of unfair treatment.
• Failure to make a reasonable settlement offer: When an insurer unreasonably denies or underpays a claim, it fails its duty to respond to a legitimate claim with a reasonable settlement offer reflecting the policy's actual value.
• Failure to respond to reasonable requests: The insurance company ignores or dismisses reasonable requests for updates, documentation explanations, or claim status information.
• Misrepresentation of policy terms: The insurer distorts the insurance policy language to avoid paying claims it knows are covered, which is one of the clearest forms of bad-faith insurance practices.

Bad-faith practices undermine the core trust that underlies insurance contracts. When an insurance company violates that trust, policyholders have the right to pursue legal action beyond the original claim amount, including when the insurer's failure caused real financial harm.

Bad Faith Tactics Insurers Use to Delay or Deny Your Claim

Bad faith practices describe patterns of behavior, while bad faith tactics describe the specific moves an insurance company uses to deny claims or reduce payouts. Both constitute bad-faith conduct and are actionable under insurance law. The insurance company's actions in these situations are often deliberate, not accidental, and the law treats them accordingly.

Common bad faith tactics include:

• Demanding excessive documentation: The insurer requires irrelevant or duplicative records to stall the claim and exhaust the policyholder's patience, creating undue delay without proper cause.
• Biased or incomplete investigations: The insurer refuses to properly investigate the facts and instead conducts a flawed review designed to support a denial from the start.
• Pressure and intimidation: The insurer uses aggressive communication to coerce the insured into accepting an offer far below a reasonable settlement offer.
• Denying a claim without citing policy language: When the insurer denied the claim without pointing to a specific exclusion, it almost certainly lacked a reasonable basis to do so.
• Losing or ignoring claim documents: The insurance company mishandles paperwork, resets deadlines, or creates confusion about the original claim timeline.

Recognizing these insurance company tactics is the first step toward fighting back. With the right legal help, each of these behaviors can become evidence in a bad-faith insurance claim that yields compensation well beyond the policy limits.

Acting in Bad Faith: Common Law and the Covenant of Good Faith

Bad-faith claims draw on two legal sources: common law tort liability and statutory insurance codes. Most states, including Illinois, recognize both theories of recovery, giving policyholders more than one avenue to pursue when an insurance company breaches its contractual obligations. The section below explains how these legal frameworks developed and what they mean for your claim under current state laws.

How Common Law Bad Faith and California Law Shaped Modern Claims

The implied covenant of good faith and fair dealing is a doctrine recognized in contract law across the United States. It is implied in every insurance policy, meaning insurers must deal fairly with policyholders regardless of whether the contract says so in those exact words. When an insurer breaches this covenant of good faith, the policyholder can sue it as a separate tort, allowing recovery to extend beyond the policy limits to include punitive damages and attorney's fees.

California law was foundational in establishing this principle. In the landmark case Gruenberg v. Aetna Ins. Co. (1973), the California Supreme Court held that insurers owe a duty of utmost good faith to policyholders, and that a breach of that duty constitutes an independent tort. This ruling shaped insurance bad-faith law nationwide and served as a model for laws enacted in many other states. When a claim based on bad faith proceeds, the insured person must show that the insurer's conduct was unreasonable, not merely the result of mere negligence or an honest dispute over coverage.

Illinois law follows a similar framework. The Illinois Insurance Code prohibits unfair practices by insurance carriers and creates legal remedies for policyholders whose claims are mishandled. First-party bad faith arises when an insurer mishandles its own policyholder's claim without proper cause. Third-party bad faith occurs when an insurer mishandles a claim filed against its insured by a third party, such as a personal injury victim whose legitimate claim the insurer unreasonably denies. Both forms of insurer's bad faith carry serious consequences. In cases of egregious insurer conduct, courts have compared certain patterns of behavior to insurance fraud, finding intent to avoid paying what is owed.

How Conboy Law Handles Your Bad Faith Insurance Claim

At Conboy Law, we approach every bad faith insurance claim with a structured process designed to expose what the insurance company did wrong and build the strongest possible case. We start with a thorough case review to determine whether the insurer's conduct crossed the line from a legitimate dispute into bad-faith litigation. From there, we gather documentation, audit the insurer's correspondence, and identify every instance of unreasonable denial, undue delay, or insurance policy failing that supports the claim.

What our clients can potentially recover goes well beyond the original claim. When insurance bad faith is proven, state laws and insurance bad faith law may allow recovery of the original claim amount, consequential damages, emotional distress damages, attorney's fees, and punitive damages in cases of egregious bad faith conduct. The American Bar Association recognizes that punitive damages in bad faith cases serve a specific public purpose: to deter insurance carriers from treating policyholders as a cost-management strategy. We make sure no category of recovery is left behind, and we fight against every unfair insurance company tactic used to deny our clients' claims.

One critical issue is timing. The Illinois Department of Insurance and Illinois courts enforce statutes of limitations that can bar a claim if you wait too long to act. Bad faith claims also require gathering and preserving the insurance company's actions and communications before they are lost or altered. We review potential bad-faith cases at no cost to the client and advise on timing from the very first conversation. If your insurer has failed to deal fairly with you, good faith and fair dealing demands better, and Conboy Law is here to make sure the law is enforced.

Frequently Asked Questions: Bad Faith Claims Defined

Contact Conboy Law for a Free Bad Faith Insurance Claim Review

Dealing with a denied or delayed claim is deeply frustrating. You are already coping with an injury or loss. You paid your premiums. You filed a valid claim. Now the insurance company acts as though your losses do not matter. These unfair practices happen more often than people think.

At Conboy Law, we know exactly what bad faith insurance practices look like. We understand insurance company tactics. We know how to hold insurers accountable under Illinois law. Your insurance bad faith claim starts with a simple conversation. Our team serves clients throughout Chicago and Illinois. We build cases that expose the full scope of the insurer's bad faith.

Do not let deadlines under state laws close the door on your case. Call Conboy Law today. Speak with an experienced bad faith insurance lawyer about your claim and the compensation you deserve.