Are low settlement offers a form of bad faith?

| Jun 15, 2021 | Insurance Bad Faith |

Many people own cars and homes in Nevada, and they invest money paying premiums for related insurance policies. Apartment renters, business owners, and others also rely on insurance coverage to pay for losses. When a client experiences a loss, filing a claim often becomes a top priority. However, the insurance provider may offer a “lowball” settlement, raising questions about “bad faith” violations.

Concerns about bad faith

Bad faith” in this context is a legal term that refers to an insurance company’s refusal to pay a valid claim or otherwise not handling contractual duties regarding a claim. Of course, an insurance company is under no obligation to pay an invalid claim. For example, if a homeowner policy excludes liability claims deriving from home demolitions, policyholders should know they can’t expect a settlement. Clients have a responsibility to read and understand their policy. Insurance companies can’t hide exclusions, though.

That said, a client may become furious when an insurance company offers a far lower settlement than what the customer feels it deserves. A low settlement is not necessarily bad faith unless the insurance provider violates its obligated duties.

Detailing the low settlement

After filing an insurance claim, a client may deal with an adjuster who works to arrive at a loss figure. The adjuster could come up with a low figure, and that is not automatically bad faith. Refusing to provide evidence for how the figure came about might be in bad faith, however.

Sometimes, clients and adjusters go back and forth in negotiations to come up with an agreed-upon figure. Lacking experience, a client may want to have an attorney handle the matter.