The basics
First-party bad faith is a claim against your own insurance company for unreasonable denial, delay, or underpayment of a valid claim. Unlike third-party bad faith (which involves a liability claim from someone you injured), first-party bad faith protects you as the policyholder.
Why it matters in 2026
To win, you generally need to prove (1) coverage existed, (2) the insurer denied or delayed payment without a reasonable basis, and (3) the insurer knew or recklessly disregarded the lack of reasonable basis. Damages can include the full claim amount, consequential damages (foreclosure, business losses), emotional distress, attorney fees, and in some states punitive damages.
How it actually works
Step one: exhaust the policy's appeal process and request a written denial citing specific policy language. Document every call, email, and inspection date. Get all reports — the insurer's adjuster notes, engineer reports, and IME findings — through a written request or, if needed, a discovery subpoena.
Common pitfalls
Step two: hire your own public adjuster or independent appraiser to produce a competing valuation. The gap between their number and the insurer's offer becomes core evidence of unreasonable conduct.
Practical recommendations
Step three: file a complaint with your state Department of Insurance (DOI) before suing. DOI complaints often produce faster movement and become admissible evidence. If still unresolved, an insurance bad faith attorney typically takes the case on contingency (33-40% of recovery) and front-loads litigation costs.
Key takeaways
- Understand the structure before you shop.
- Compare quotes from at least three carriers.
- Document everything and revisit coverage annually.
- Pair with related coverage for full protection.
Related reading on InsureLab
Sources & further reading
Frequently asked questions
What is the difference between first- and third-party bad faith?+
First-party is YOUR claim against your own insurer for denying your loss. Third-party arises when the insurer's bad faith puts you on the hook for a judgment in someone else's claim against you.
Do I need an attorney to file a bad faith claim?+
Strongly recommended. Most insurance bad faith attorneys work on contingency and front-load litigation costs, so there's typically no out-of-pocket fee to start.
Will a Department of Insurance complaint help?+
Yes — DOI complaints often produce faster resolution and create a paper trail admissible in court. File one before suing.
What damages can I recover in a bad faith case?+
Typically the full claim amount, consequential damages (foreclosure, lost business), attorney fees, emotional distress, and in some states punitive damages.
Found this helpful?
Share it with a friend who's about to renew their policy — and browse our other guides while you're here.