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What is Bad Faith?

When you buy an insurance policy, you expect your insurer to honor its commitments. Whether it’s auto, homeowners, or health insurance, the fundamental principle behind insurance is that policyholders pay premiums in exchange for coverage when disaster strikes. However, not all insurance companies act in good faith. When an insurer unreasonably denies, delays, or underpays a legitimate claim, it may be acting in “bad faith.”

If you believe your insurance company is not treating you fairly, you may have a legal claim under Montana law. In this blog, we will explore what constitutes bad faith in Montana, why it occurs, and how an attorney can help you recover the compensation you are owed.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company unreasonably refuses to fulfill its contractual obligations to a policyholder. In Montana, both statutory and common law recognize an insurer’s duty to act in good faith and deal fairly with policyholders. Insurers are also required to conduct reasonable investigations before denying claims and must not compel policyholders to initiate litigation to recover what they are owed.

Montana also recognizes common law bad faith, which allows policyholders to sue for damages beyond what the policy covers, including emotional distress and punitive damages if the insurer’s actions were particularly egregious. This legal framework ensures that insurers are held accountable when they attempt to take advantage of policyholders.

Why Does Bad Faith Occur?

Insurance companies are businesses, and their primary goal is profitability. The less they pay in claims, the more they retain in profits. While many insurers honor their commitments, some engage in bad faith tactics to save money. Profit motives often drive these actions, as insurance adjusters may be pressured to minimize payouts or deny claims to meet corporate financial targets. In some cases, insurers employ delaying tactics, hoping policyholders will become frustrated and accept a lower settlement or give up entirely. Others may issue outright unreasonable denials, sometimes without a proper investigation.

Another common bad faith tactic is making lowball offers, even when liability is clear. Some insurers offer significantly less than what a claim is worth, forcing claimants to negotiate or even sue. Additionally, failing to conduct a proper review before denying a claim is a frequent issue, leading to unjustified denials that leave policyholders in difficult financial situations.

How to Identify Bad Faith Tactics

If you are dealing with an insurance claim in Montana, watch for warning signs that may indicate bad faith. Your insurer may refuse to communicate or be unresponsive, provide unclear or shifting reasons for denying your claim, or request unnecessary documentation to delay the process. Another red flag is receiving a settlement offer that is significantly lower than your damages. Some insurers misrepresent policy terms or Montana law to justify denying claims, while others fail to conduct a thorough investigation before issuing a denial.

Why You Need an Attorney for a Bad Faith Claim

Insurance companies have vast resources and legal teams dedicated to minimizing their liability. Going up against them alone can be overwhelming. An attorney can evaluate your claim by reviewing your insurance policy, denial letter, and communications with the insurer to determine whether you have a bad faith claim. A lawyer can also demand fair compensation, pushing for a settlement that adequately covers your losses, and negotiate on your behalf to maximize your recovery.

If negotiations fail, an attorney can file a lawsuit for bad faith and other legal claims, ensuring that the insurer is held accountable. Montana law allows successful bad faith claims to result in compensation beyond policy limits, including punitive damages if the insurer acted maliciously or fraudulently. By taking legal action, you not only seek justice for yourself but also help ensure that insurance companies operate more fairly in the future.

What Damages Can You Recover in a Montana Bad Faith Claim?

Montana allows policyholders to recover damages beyond their insurance benefits if they prove bad faith. Compensation may include contractual damages, which is the amount the insurance company should have paid under the policy, as well as consequential damages for losses incurred due to the insurer’s bad faith, such as additional medical bills or lost income. Emotional distress damages are also available if the insurance company’s actions caused significant stress or hardship. In cases where the insurer’s conduct was particularly reckless or malicious, Montana courts may award punitive damages to deter future misconduct.

What to Do If You Suspect Bad Faith

If you believe your insurance company is acting in bad faith, take proactive steps to protect yourself. Document everything, including copies of correspondence, claim forms, policy documents, and any communication with the insurer. Request a written explanation for any denial or delay, as this can provide valuable evidence in a legal claim. When possible, it is always best to get everything in writing. Often, insurance companies will make oral promises of which there is no record. You can also file a complaint with the Montana Commissioner of Securities and Insurance (CSI), which oversees insurance practices in the state. Most importantly, consult an attorney who specializes in bad faith insurance claims. A legal professional experienced in Montana insurance law can assess your case and advise you on the best course of action.

Final Thoughts

Insurance companies should be held accountable when they fail to honor their promises. Montana law provides strong protections for policyholders, but asserting your rights often requires legal expertise. If you suspect that your insurer is acting in bad faith, consulting an attorney is the best way to ensure that you receive the compensation you are entitled to.

If you are dealing with a denied or delayed insurance claim in Montana, don’t hesitate to seek legal guidance. A knowledgeable attorney can help you fight back against bad faith practices and recover the compensation you deserve.

The lawyers at Boland Aarab PLLP are well versed in the tactics employed by insurance companies and have years of experience litigating and resolving bad faith claims. If you believe your insurance company may be operating in bad faith, please contact us to set up a free consultation today. You can also set up a consultation and find additional information on our site.