Proving that An Insurance Company Acted in Bad Faith

When a Nevada insurance company violates its duty to act in good faith, the insureds must prove the legal elements of insurance bad faith in order to prevail in lawsuits against the company. The Nevada Supreme Court recognized the tort of insurance bad faith in 1975, allowing insured Nevadans to file lawsuits against their insurance companies when the companies have violated one of their duties. Lawyers in Las Vegas may review the insurance policies and the manner in which the insurance companies have dealt with their clients’ claims in order to determine whether the companies acted in bad faith. If they did, the attorneys may file lawsuits for their clients.

What is Bad Faith?

In Nevada, an insurance company acts in bad faith when it breaches its duty of fair dealing and good faith when the relationship between it and the other party is a fiduciary one between the insurer and the insured. Nevada law provides that an insurance company that denies a first-party claimant’s claim for benefits when there is not a reasonable basis for denying the claim has acted in bad faith. The law does not recognize the rights of third parties to make claims against insurance companies for bad faith because they do not have contractual relationships with the companies.

What Must Plaintiffs Show to Prove Insurance Bad Faith?

It is not enough to show that an insurance company failed to pay benefits when a claim has been made. Nevada law requires that plaintiffs must prove that their insurance companies denied their claims and had no reasonable basis to do so. They must also prove that the insurance companies knew that there was no reasonable basis for denying the claims or acted in reckless disregard of the unreasonableness of the denials. Making errors in the estimation of the value of a claim is not bad faith, which means that it is not an act of bad faith when an insurance company disputes the value of a claim.

Proving that an insurance company acted in bad faith may be complex. A plaintiff may have claims under the common law and under the Unfair Practices in Settling Claims Act. Lawyers in Las Vegas may assist their clients with gathering the evidence that may be needed to prove that the insurance companies breached their duties to act fairly and to act in good faith.

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