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Understanding Bad Faith Insurance Practices in Florida, New Jersey, and New York

What is Bad Faith Insurance?

Bad faith insurance practices involve an insurer's intentional refusal to honor its contractual obligations to the policyholder. This occurs when an insurance company fails to act in good faith and fair dealing, which it is legally required to do. Bad faith can be both first-party (directly against the policyholder) and third-party (against a party making a claim against the policyholder).


Insurance claim denied by an insurance company

How Does Bad Faith Occur?

Bad faith can occur through various deliberate actions by the insurer, including:

  • Misrepresentation of Policy Terms: Insurers may intentionally misrepresent the terms of the policy to deny coverage.

  • Improper Investigation: Conducting a biased or incomplete investigation to justify denying a claim.

  • Unreasonable Denial or Delay: Denying or delaying payment without a reasonable basis.

  • Lowball Offers: Offering settlements far below the claim's actual value.


Florida Law

Under Florida Statutes §624.155, an insurer can be held liable for bad faith if it fails to settle claims when it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for their interests.

New Jersey Law

In New Jersey, the "fairly debatable" standard applies, meaning the insurer must demonstrate a reasonable basis for denying a claim. The case of Pickett v. Lloyd’s, 131 N.J. 457 (1993), is a pivotal ruling that requires insurers to justify their actions reasonably.

New York Law

In New York, proving bad faith requires showing that the insurer engaged in egregious conduct or a pattern of unfair practices, as established in Pavia v. State Farm Mutual Auto. Ins. Co., 82 N.Y.2d 445 (1993). This case demonstrates the high burden of proof required to establish bad faith.


 

What to Do If You Suspect Bad Faith

If you believe your insurance company is acting in bad faith, take the following steps:

Insurance acting in bad faith when denying a claim.
  1. Understand Your Policy: Review your insurance policy to understand your coverage and rights.

  2. Document Everything: Keep detailed records of all communications with your insurer, including emails, letters, and phone calls.

  3. File a Complaint: You can file a complaint with your state's insurance regulatory agency. In Florida, this is the Florida Office of Insurance Regulation; in New Jersey, it's the New Jersey Department of Banking and Insurance; and in New York, it's the New York State Department of Financial Services.

  4. Seek Legal Advice: Consult with an experienced attorney who specializes in insurance bad faith claims. They can help you understand your rights and take appropriate legal action.


State-Specific Tips

Handling bad faith insurance claims varies significantly depending on the state.

Each jurisdiction has its own laws, procedures, and standards that affect how these cases are approached. Below, we provide specific tips for Florida, New Jersey, and New York to help you effectively address bad faith practices in your state. These tailored insights will help you take appropriate action and protect your rights based on your location.

Florida Tip

In Florida, policyholders have the right to file a Civil Remedy Notice (CRN) with the Department of Financial Services. This notice gives the insurer 60 days to resolve the issue before a lawsuit can be filed (Fla. Stat. §624.155).

New Jersey Tip

In New Jersey, keeping meticulous records of all interactions with the insurer is crucial for building a strong case under the "fairly debatable" standard. Refer to the case Pickett v. Lloyd’s, 131 N.J. 457 (1993), for guidance on how courts assess these claims.

New York Tip

In New York, due to the high burden of proof required to establish bad faith, it is essential to gather substantial evidence of the insurer's egregious conduct or pattern of unfair practices. Refer to Pavia v. State Farm Mutual Auto. Ins. Co., 82 N.Y.2d 445 (1993) for more details on the legal standards applied in these cases.


 

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Examples of insurance companies acting in bad faith.

Real-World Examples of Bad Faith

Insurance Practices

Understanding real-world examples can help illustrate how bad faith insurance practices manifest and the legal precedents that protect policyholders. Below are notable cases from Florida, New Jersey, and New York, each highlighting significant legal rulings on bad faith insurance.


Florida: Statute and Case Law

In Florida, bad faith insurance practices are addressed by Fla. Stat. §624.155. This statute allows policyholders to file a civil remedy notice (CRN) when they believe their insurer is not acting in good faith. The insurer must respond and potentially correct the issue within 60 days. Failure to do so can lead to a bad faith lawsuit, where the insurer might be liable for punitive damages far exceeding the initial claim. This provision helps ensure that insurers handle claims promptly and fairly.

Detailed Case Explanation: A key case demonstrating the application of this statute is Fla. Stat. §624.155, which highlights how bad faith can lead to significant punitive damages if an insurer fails to settle a claim when it could have done so in good faith. This statute is designed to deter insurers from denying valid claims or delaying payments unjustifiably. By allowing for punitive damages, the law provides a strong incentive for insurers to treat policyholders fairly.


New Jersey: Statute and Case Law

In New Jersey, the "fairly debatable" standard applies, meaning the insurer must demonstrate a reasonable basis for denying a claim. The case of Rova Farms Resort, Inc. v. Investors Insurance Co. of America, 65 N.J. 474 (1974), set a precedent for holding insurers accountable for not settling claims within policy limits when they should have. This case established that insurers must act in the best interests of their policyholders and cannot unduly risk exposing them to liability beyond their coverage limits. The ruling emphasized that insurers must make settlement decisions as if they were the policyholder, considering the financial impact on the insured.

Detailed Case Explanation: In Rova Farms Resort, Inc. v. Investors Insurance Co. of America, the insurer failed to settle a claim within the policy limits, thereby exposing the insured to a judgment that exceeded their coverage. The New Jersey Supreme Court ruled that insurers must act with the same consideration they would if they were liable for the full amount of the judgment. This case underscored that failing to settle within policy limits when there is a substantial likelihood of a judgment exceeding those limits constitutes bad faith.


New York: Statute and Case Law

In New York, proving bad faith requires showing that the insurer engaged in egregious conduct or a pattern of unfair practices, as established in Pavia v. State Farm Mutual Auto. Ins. Co., 82 N.Y.2d 445 (1993). This case demonstrates the high burden of proof required to establish bad faith. The court ruled that simply proving that the insurer made a mistake or was negligent was not enough. Policyholders must show that the insurer's actions were not just negligent, but also egregious or indicative of a pattern of unfair practices.

Detailed Case Explanation: In Pavia v. State Farm Mutual Auto. Ins. Co., the insured sued State Farm for bad faith after the insurer refused to settle a claim within the policy limits, resulting in a judgment against the insured that exceeded those limits. The New York Court of Appeals held that to prove bad faith, the insured must show that the insurer's conduct was not just negligent, but egregious or indicative of a pattern of unfair practices. This ruling makes it challenging to prove bad faith in New York, emphasizing the need for clear and compelling evidence of the insurer's misconduct.

 

Questions and answers about bad faith claims

FREQUENTLY ASKED QUESTIONS ABOUT BAD FAITH & BAD FAITH INSURANCE TACTICS

  • QUESTION: What should you do if your insurance claim is denied in Florida?

ANSWER: Review Your Policy: Carefully read your insurance policy to understand the coverage and the reasons given for the denial.

  1. Gather Documentation: Collect all correspondence, evidence, and documentation related to your claim, including emails, letters, photos, and medical records.

  2. Request a Detailed Explanation: Ask your insurer for a comprehensive explanation of why your claim was denied. They are required to provide this information.

  3. File a Complaint: If you believe the denial is unjust, file a complaint with the Florida Office of Insurance Regulation. This can initiate an investigation into the insurer's practices.

  4. Consult an Attorney: Contact an experienced insurance bad faith attorney to evaluate your case. They can help determine if the insurer acted in bad faith and advise on potential legal actions.

  5. Civil Remedy Notice: In Florida, you can file a Civil Remedy Notice (CRN) to notify the insurer of the bad faith claim and provide them with 60 days to remedy the situation before proceeding with a lawsuit (Fla. Stat. §624.155).

By taking these steps, you can better navigate the process and protect your rights.


  • QUESTION: What are my Legal options for bad faith insurance in New Jersey?

ANSWER: Review Your Policy: Understand your insurance policy's terms and the reasons for the denial or underpayment.

  1. Document Everything: Keep detailed records of all interactions with your insurer, including communications and any evidence related to your claim.

  2. File a Complaint: Submit a complaint to the New Jersey Department of Banking and Insurance to initiate an investigation into the insurer's conduct.

  3. Consult an Attorney: Contact an experienced bad faith insurance attorney. They can provide legal advice, help you gather evidence, and represent you in negotiations or court.

  4. Fairly Debatable Standard: New Jersey uses the "fairly debatable" standard. To succeed in a bad faith claim, you must show that the insurer had no reasonable basis for denying the claim and knew or recklessly disregarded the lack of a reasonable basis (Pickett v. Lloyd’s, 131 N.J. 457, 1993).

  5. Legal Action: If your case is strong, your attorney can file a lawsuit against the insurer for bad faith. Successful claims may result in compensation for the original claim, emotional distress, and punitive damages.

By following these steps, you can better understand and pursue your legal options for addressing bad faith insurance practices in New Jersey.


  • QUESTION: What do I do if my auto insurance claim was denied in New York?

ANSWER: Review the Denial Letter: Carefully read the denial letter from your insurer to understand the specific reasons for the denial.

  1. Understand Your Policy: Review your auto insurance policy to verify the coverage details and see if the denial aligns with your policy's terms.

  2. Gather Evidence: Collect all relevant documentation, including accident reports, photos, repair estimates, medical records, and correspondence with your insurer.

  3. Request a Detailed Explanation: Contact your insurance company and request a comprehensive explanation for the denial. Insurers are required to provide this information.

  4. File a Complaint: If you believe the denial is unjust, file a complaint with the New York State Department of Financial Services, which oversees insurance companies in New York.

  5. Consult an Attorney: Contact an experienced auto insurance or bad faith attorney. They can review your case, provide legal advice, and help determine if the denial constitutes bad faith.

  6. Consider Legal Action: In New York, proving bad faith requires showing that the insurer engaged in egregious conduct or a pattern of unfair practices (Pavia v. State Farm Mutual Auto. Ins. Co., 82 N.Y.2d 445, 1993). Your attorney can guide you through the process of filing a lawsuit if necessary.

  7. Mediation or Arbitration: Explore alternative dispute resolution options such as mediation or arbitration, which can be faster and less costly than going to court.

By following these steps, you can effectively address a denied auto insurance claim in New York. For personalized advice, consult a legal professional who specializes in insurance disputes in New York.


Bad faith insurance practices can have severe impacts on individuals and families.

Understanding what constitutes bad faith, recognizing the signs, and knowing how to protect yourself is crucial. By being informed and proactive, you can better navigate and challenge unfair insurance practices.


Have a question about an insurance company that may be acting in bad faith?

Call (561) 440-7775 and ask to speak with attorney Kayla Sheldrick.

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