Bad Faith Insurance Litigation

Bad Faith Claims: Remedies when insurance companies do not comply with their duties under an insurance policy

Insurance companies owe their Arizona insureds a duty of good faith and fair dealing. If an insurance company violates its duty, its insured may have a bad-faith claim against the insurance company. When you are the victim of someone else’s wrongdoing and the insurance company for the wrongdoer violates its duty to the wrongdoer, victims of the wrongdoer’s actions are often the ones who suffer.

Fortunately, there are circumstances under which a victim may be able to hold an insurance company responsible for failing to comply with the duties it owed to its insured who caused the victim’s injuries. Many times, this may be the only way to make a financial recovery against a wrongdoer. It has been our experience as crime victim attorneys that insurance companies seem more likely to violate their duties to their insureds when their insureds are charged with crimes for their wrongdoing.

An insurance company’s good-faith duty to its insured means it is required to act in its insured’s best interest. It has an obligation to go through a process of due diligence in evaluating a claim and cannot put its own interest before the interests of its insured. Examples of bad faith on the part of the insurance company may include the following actions:

• Unjustified delay in handling a claim
• Inadequate investigation of a claim
• Refusing to defend a lawsuit against an insured without a proper basis
• Making threats against an insured
• Refusing to make a reasonable settlement offer
• Interpreting its own policy in an unreasonable manner

Insurance companies serve a valuable purpose in our society by offering protection from the risk of catastrophic injury or financial loss for wrongdoers. Insurance companies, however, are profit-motivated corporations with an incentive to pay out as little as possible on their obligations under the policies that they issue. When an insurance company is reluctant to pay a claim as required by the insurance policy, its behavior may give rise to a bad faith claim.

A bad faith insurance claim is not always apparent at the onset of an injury case. However, it is important for victims to be aware of an insurance company’s duties toward its insureds when victims pursue compensation for their injuries.