Insurance Bad Faith

Insurance bad faith occurs when an insurance company fails in its obligations to its clients to indemnify and defend you within a reasonable period of time if the event for which you are insured occurs. We all have insurance policies of one type or another – on our cars, our homes and our lives – and we pay our premiums in “good faith” that if we have a road traffic accident, our house is burgled or we lose a loved one, that the insurance company will be there in good time to provide legal or financial support as appropriate. However, when they fail to do so, or misrepresent what is actually covered in your insurance policy, this is known as insurance bad faith.

What Constitutes Insurance Bad Faith?

The list of practices which constitute insurance bad faith would cover many pages but can be broken down into five main categories:-

Misrepresenting or mis-selling the benefits of an insurance policy

This might occur if an insurance salesman was on a sales target or a company advertised a special benefit of their insurance policy which was only applicable in select circumstances.

The claims investigation process

Insurance bad faith can occur when a company fails to implement the prompt investigation of a claim, makes an inadequate investigation into a claim or refuses to pay a claim without an investigation – even when there is sufficient information available.

Paid-Up policies and policy surrender values

This is where an insurance company attempts to settle a paid-up or surrendered insurance policy for less than the insured believed they were entitled to. Quite often this is related to the insurance bad faith act of misrepresentation.

Refusal to defend a policyholder in a court action

This insurance bad faith action can be over a number of issues. You may be the cause of a road traffic accident in which somebody has been injured, an employer who faces a compensation claim after a work-related accident to an employee or a small business fighting a product liability case.

Refusal to make a reasonable settlement offer

This is a scenario where the insurance company is defending you in a court action, but will not settle a reasonable amount of compensation on your behalf. Primarily this is because they are looking after their own interests and not those of their client.

What Are The Instances of Insurance Bad Faith?

In Ireland, the Financial Services Ombudsman is responsible for handling complaints against insurance companies and in 2009 received 4,668 complaints related to insurance issues. This represents an increase of 40% over the number of complaints about insurance companies in 2008 and, as financial times get more difficult for companies and individuals alike, it is not unlikely that this figure could increase even further in forthcoming years.

Almost a quarter of these related to insurance companies refusing to pay out on an insurance policy where they claimed the insured had not made a full disclosure on the application form. The Ombudsman believes that unless it can be proven there is a deliberate attempt by the insured to defraud the insurance company, full payment should be made on the grounds that many application forms ask questions requiring knowledge which the signatory could not reasonably be expected to possess.

The two largest year-on-year increases in complaints made to the Financial Services Ombudsman related to the surrender value of insurance policies and claims handling issues. But perhaps the most alarming statistic to come out of the FSO annual report was the 83% rise in mis-selling and misrepresentation of insurance policies – an instance of insurance bad faith which is only discovered when the insured person needs to claim against their insurance policy.

Can I Claim Compensation for Insurance Bad Faith?

These instances above relate only to those complaints made to the Financial Services Ombudsman – they do not include anybody who has already consulted a solicitor in respect of claiming insurance bad faith compensation or the many thousands who quietly put up with the mishandling of their insurance policies. There are no overall figures relating to the total number of dissatisfied insurance company clients, and many who make complaints to the insurance companies themselves either suffer a lack of customer service or have their grievances met by a wall of legal argument which does nothing to resolve their problem.

The facts of the matter are that should an insurance company fail to make adequate payment to you – or on your behalf – in line with the amounts and time period stated in your insurance policy document, they are in breach of contract and can be sued for insurance bad faith. In the event of their mis-selling or misrepresenting the benefits of an insurance policy, it would be best to speak with a solicitor about the individual circumstances surrounding the complaint, as it would if there is an issue about non-disclosure creating a scenario in which the insurance company fails to make a full insurance payment to you.

Claims for insurance bad faith compensation are dealt with by the three tier court system in Ireland. Most often, it will be the District Court that determines whether you are indeed entitled to claim compensation and award an amount of compensation. But where cases may involve the cancellation of policies without the insured´s knowledge, larger sums of money may be involved and cases of insurance bad faith will be presented to the Circuit Court or High Court.

Speaking With a Solicitor about Insurance Bad Faith Compensation

Speaking with a solicitor about insurance bad faith compensation is very straightforward. The solicitor will ask you questions in relation to your insurance policy, the benefits that were promised to you when you initially signed the agreement and the problems you are experiencing now. It is useful to have all your insurance documents with you when you call as this will enable you to answer some of the questions that you would be asked and help the solicitor determine if there is a case for insurance bad faith compensation which it is worth your while to pursue.

Some people may be apprehensive about speaking with a solicitor or pursuing a claim for insurance bad faith compensation when they have developed a relationship with the insurance salesperson who visits regularly to collect their premiums. Please note that it is not the insurance salesperson you would be claiming insurance bad faith compensation from, but the company for whom he works. Most often, the only knowledge he will have of your complaint is if you tell him – unless he is directly responsible for mis-selling an insurance policy to you, it will be the corporate body that has to defend your compensation claim.

If you are experiencing issues with an insurance company and believe that you may be entitled to make a compensation claim for insurance bad faith, you are invited to call our free advice line on 1 800 283 032 and speak with an experienced Irish solicitor. Many of the solicitors who are assembled on our panel will have contributed to this web site and will be familiar with the instances of bad faith insurance and how best to claim compensation against the insurance companies. They will be able to offer you practical and helpful advice and provide accurate information which will help you decide whether or not you wish to proceed with a claim.

Our freephone telephone service is available between 8.00am and 10.00pm – seven days a week – and if it is not a convenient time to call right now, please leave your contact details in the call-back box at the foot of the page and one of our team will be in touch. Please note that you are under no obligation to proceed with a claim for insurance bad faith compensation once you have spoken with one of our solicitors.


  • There are a number of elements of an insurance company´s lack of service which constitute insurance bad faith.
  • In 2009, the Financial Services Ombudsman received almost five thousand complaints against insurance companies – many of these relating to insurance bad faith and a 40% increase on the previous year.
  • Insurance bad faith can include instances where the insurance company fails to defend a policyholder in a court action or refuses to make a reasonable settlement offer.
  • The mis-selling or mis-representation of an insurance policy also constitutes insurance bad faith, and when these events occur you are entitled to sue the insurance company for insurance bad faith.
  • It is not your door-to-door insurance premium collector who is sued in a claim for insurance bad faith but the company itself. If he has misled you into purchasing an inappropriate policy, that is an internal matter for the insurance company to deal with.
  • Our solicitor will be able to talk you through the full range of practices which constitute bad faith, so call our free advice service for more information.

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