Just because an insurance company denies a claim doesn’t mean it acts in bad faith. An insurance policy is a contract between you and the insurance company. The policy includes coverage you pay for in addition to exceptions. As long as you pay the premiums, the insurance company should pay any claims against it, whether filed by you or a third party. If an insurance company does not pay a claim that it covers, delays paying the claim, or pays less than it should, it opens itself up to a bad claim lawsuit. Some of the reasons you might have a bad faith claim include the following: Payment delays. The insurance company should pay for an incident but uses tactics to avoid paying the claim. Unexpectedly canceling policies. If you erred when completing the paperwork related to the insurance policy or the policy contains a minor error you failed to notice before signing the policy, the insurance company could use those errors to cancel the policy. This is common with life insurance policies. The insured paid all the premiums but made an insignificant error. When it’s time to pay when the insured dies, the insurance company uses this error to deny payment. Denies payment without investigating the claim. If the insurance company denied a claim without investigating it, you could have a bad faith claim. Insurance companies need to investigate claims to determine whether they are good and then pay promptly if the claim is good. The insurance company pays less than you deserve. If an insurance company tries to avoid paying the full amount you deserve for your losses, it might be acting in bad faith. For example, if your damages are $50,000 and the insurance company only pays $10,000, it is not covering all of the losses it agreed to cover in the policy. Policy exclusions. Every policy has exclusions, but if the insurance company excludes payment and states that it is an exclusion when it is not, the insurance company acts in bad faith. Other ways an insurance company could act in bad faith include: Failing to investigate the claim on time. Evidence often disappears, whether purposely or inadvertently. For example, in a car accident claim, the police might impound the vehicle, and the weather could deteriorate the evidence. In an icy sidewalk slip-and-fall claim, the ice could have melted long before the insurance company investigated the claim. Delays any or all stages of the claims process. Failing to settle third-party claims. Misinterpret insurance policies. Miscommunication of policy requirements. Attempting to cancel a policy after you file a claim. Filling out extensive paperwork. Failing to point out and explain policy limitations before the insured signs the contract for the policy.