The principle of good faith underpins the contractual relationship between insurers and policyholders. Insurer bad faith occurs when an insurance company engages in practices that are unfair, deceptive or contrary to the terms of the insurance contract. This can lead to financial harm to the insured, who relies on insurance proceeds for recovery and stability. However, the insured can bring a claim against the insurer for damages.

The Connecticut Unfair Insurance Practices Act (CUIPA) provides a framework for identifying and addressing insurer bad faith. It outlines behaviors that are considered unfair or deceptive, namely:

1. Arbitrary claim denial — This occurs when an insurer denies a claim without a reasonable basis, which represents a failure to acknowledge and act responsibly.

2. Excessive delay — Prolonged processing of claims that is not justified by the circumstances can work to the prejudice of insureds.

3. Inadequate investigation — Failure to conduct a thorough investigation of the circumstances surrounding a claim can lead to incorrect denials or underpayments.

4. Failure to communicate — Insurers must keep policyholders informed about the status of their claims. A lack of communication can leave policyholders in limbo and cause undue stress.

5. Low settlement offer — Insurers might offer significantly less money than a claim is worth in order to pressure vulnerable policyholders into accepting less than they deserve.

6. Rejection of a good faith offer — If a policyholder makes a reasonable offer to settle a claim, it is improper for an insurer to reject it without proper justification.

7. Policy cancellation — Canceling a policy to avoid paying a claim is a severe form of bad faith that is strictly scrutinized under CUIPA.

While CUIPA itself only provides for regulatory sanctions, these statutory violations can be cited in private lawsuits brought by insured parties alleging insurer bad faith.

A bad faith lawsuit can be brought on grounds that the insurer breached the implied covenant of good faith and fair dealing inherent in every insurance contract. If successful, the insured may recover not only the original amount due under the policy but also damages for the insurer's misconduct, which can include emotional distress, attorneys’ fees and in some cases punitive damages.

A policyholder should seek the assistance of an experienced Connecticut litigation attorney who can fight vigorously for the compensation deserved. An attorney's expertise in handling bad faith claims is invaluable in leveling the playing field against well-resourced insurance companies and ensuring that policyholders receive fair treatment under the law.

If you believe you are being mistreated by an automobile or home insurer in Connecticut, contact the lawyers of Gesmonde, Pietrosimone & Sgrignari, L.L.C. for a consultation at our Hamden or East Haven office. Call us at 203-745-0942 or contact us online anytime.