What Is Insurance Bad Faith?

Most people buy insurance for peace of mind, hoping they will never have to use it. But when a disaster or unexpected event happens and you need to file a claim, you expect your insurance company to be there for you. When they unreasonably delay, deny, or undervalue a legitimate claim, it can feel like a complete betrayal. This unfair conduct is called "insurance bad faith."

An insurance policy is more than just a contract; it is a promise. Insurance companies have a legal duty to act in good faith and deal fairly with their policyholders. This means they must give your interests at least as much consideration as they give their own. When an insurer puts its own profits ahead of its duty to you, it may be acting in bad faith, and you may have the right to take legal action.

What Are Examples of Bad Faith?

Bad faith can take many forms, from outright denial to frustrating delays. Common examples of bad faith include:

• Failing to properly investigate a claim. An insurer must conduct a timely and complete investigation into your claim.

• Unreasonably delaying or denying a valid claim. If your claim is legitimate, the company should not refuse to pay it without a good reason.

• Offering a settlement amount that is far too low. This is sometimes called "low-balling" and is a way for an insurer to save money at your expense.

• Failing to defend you from a lawsuit. If you have a liability policy, your insurer may have a duty to defend you against a lawsuit, and failing to do so can be bad faith.

• Misrepresenting the terms of your policy. An insurance company should not mislead you about what is covered.

Insurance Bad Faith Law in South Dakota

The laws that govern insurance bad faith vary significantly from state to state. Both Georgia and South Dakota have laws that allow you to sue an insurer for bad faith, but the specifics of how you can recover damages are different.

South Dakota Bad Faith Law

South Dakota law treats bad faith as a separate legal claim, or "tort," that is distinct from your original contract claim.

• How it's Proven: To prove bad faith in South Dakota, you must show that there was no reasonable basis for the insurer to deny your benefits and that the company knew or recklessly disregarded this lack of a reasonable basis.

• Damages: Because bad faith is a tort in South Dakota, you may be able to recover additional damages beyond what was owed on the policy, as well as attorney's fees and potentially punitive damages in the most egregious cases.

Why Insurance Bad Faith Law Is Important

Insurance bad faith law is in place to protect consumers. Without these laws, insurance companies would have little incentive to pay valid claims promptly and fairly. Having strong laws that hold insurers accountable encourages them to operate honestly and to honor the promises they made in your policy.

At DEH Law, we have experience fighting for policyholders who have been wronged by their insurance companies. We understand the tactics insurers use to delay and deny claims, and we are prepared to hold them accountable.

If you have been cheated by your insurance company in South Dakota, you do not have to fight this battle alone. Contact Daniel E. Holloway at DEH Law for a free consultation to discuss your situation and understand your legal options.