Insurance Bad Faith

Insurance companies have a legal and ethical duty to treat policyholders fairly. When you file a claim for long-term disability (LTD) or long-term care insurance (LTC or LTCI) benefits, you are not asking for a favor; you are invoking a contract you paid into, often for years or decades. But too often, insurers operate in bad faith, delaying, denying, or underpaying claims not because they are invalid, but because it protects the company’s bottom line.

At Sandstone Law Group, we confront bad faith practices head-on. We represent individuals who have been deceived, stonewalled, or mistreated by their disability or long-term care insurers. When a company refuses to honor its obligations, we fight to hold them legally and financially accountable.

Consult with an experienced insurance bad faith lawyer at Sandstone Law Group today to get the support and justice you deserve.

What Is Insurance Bad Faith?

When you buy insurance, you are entering into a contract built on trust. You pay your premiums with the expectation that, when life takes a turn, your insurance company will deliver on its promise. That promise includes more than just paying claims; it includes an unspoken but legally binding obligation to act in good faith.

Insurance bad faith occurs when an insurance company violates the covenant of good faith and fair dealing by handling your claim in a way that is dishonest, unfair, or deliberately obstructive. Instead of evaluating your claim based on facts and policy terms, the insurer prioritizes its profits, often at your expense.

Every insurance policy contains an implied covenant of good faith and fair dealing. This legal principle requires insurers to:

• Promptly and thoroughly investigate claims
• Consider all evidence, not just that which supports denial
• Communicate decisions clearly and in a timely manner
• Refrain from unreasonable delays or benefit withholdings
• Act in the policyholder’s interest, not just their own.

When an insurance company cherry-picks evidence, delays without cause, misinterprets policy language, or ignores clear proof of eligibility, it violates this covenant. Importantly, proving bad faith does not always require showing malice or immoral intent. It is often enough to demonstrate that the insurer lacked a reasonable basis for its actions and failed to engage in fair claims handling.

Bad Faith vs. Simple Mistakes

Not every denial is bad faith. Sometimes insurers make genuine errors in reviewing claims. But when those errors persist without correction, or when the insurer’s actions systematically favor denial over fair evaluation, bad faith becomes a real possibility.

To prove bad faith, a claimant may typically show:

• The insurer did not have a reasonable basis for denying the claim or delaying a decision
• There was no genuine dispute over your right to benefits, based on the facts or the law
• The insurer failed to conduct a full, fair, prompt, or thorough investigation of all the bases of the claim or refused to properly evaluate or dilligently search for supporting evidence
• The insurer failed to reasonably inform the insured of the insured’s rights and obligations under the insurance policy

This is a high legal standard, and one that insurers know how to defend against. That is why it’s essential to work with a legal team that understands how to gather the right evidence, leverage the correct laws, and expose misconduct when it occurs.

Recognizing Common Bad Faith Tactics

Bad faith behavior is not always obvious. It can look like endless delays, vague denials, or offers that barely scratch the surface of your actual losses. Over time, these tactics wear people down emotionally, physically, and financially.

Here are some of the most common strategies insurers use to act in bad faith:

• Unreasonable Delays: Some insurers drag out the claims process on purpose—requesting documents one at a time, failing to respond to inquiries, or endlessly “reviewing” files. These tactics are meant to exhaust policyholders into accepting less or abandoning the claim altogether.  Courts recognize that insurers have a duty to act promptly and communicate clearly and delays that are strategic or without valid reason can qualify as bad faith.
• Denials Without Justification: When a claim is denied without a clear, legitimate reason, or when the insurer offers only vague references to policy terms, it may be a red flag. Misapplying definitions, ignoring medical records, or refusing to explain decisions are all hallmarks of bad-faith denials.  Courts consider whether the insurer had a reasonable basis for denial. If not, they may find a breach of the covenant of good faith.
• Lowball Settlement Offers: Even when insurers approve a claim, they may offer far less than what is actually owed. These “take-it-or-leave-it” settlements are designed to make the insurer look cooperative while minimizing payouts. Policyholders facing mounting bills may feel pressured to accept an unfair amount. Offering a knowingly inadequate payout, especially in the face of clear documentation, is a well-established bad faith tactic, especially in long-term care claims where costs of care are clearly documented.
• Failure to Properly Investigate: This has formed the core of many successful bad faith cases.  A valid claim requires a thorough, unbiased investigation. When insurers skip interviews, ignore key evidence, or rely only on internal reviewers known for denying claims, they are seeking ways to say no. California law especially requires insurers to conduct a thorough, good faith investigation of claims. Cherry-picking records or relying only on biased reviewers can violate this duty.
• Misrepresentation of Policy Terms: Some companies intentionally distort or oversimplify policy language. They may claim that certain benefits aren’t covered when they actually are, or misinterpret exclusions to fit their own narrative. This kind of manipulation is a hallmark of bad-faith conduct. Deliberately misrepresenting coverage to avoid paying valid claims is a serious violation—and one that is frequently litigated, especially when insurers misinterpret key definitions like “disabled” or “medically necessary.”
• Threats or Intimidation: In extreme cases, insurers may threaten to cancel coverage, refuse to renew a policy, or suggest that filing a claim will cause future problems. This is not only unethical, but it may also be illegal. No one should be afraid to access the benefits they have rightfully paid for.

When these tactics are part of a deliberate pattern, rather than honest mistakes, they may form the basis for a bad-faith lawsuit.

Bad Faith in Long-Term Disability (LTD) Claims

Long-term disability insurance is supposed to provide a safety net when injury or illness prevents you from working. But for many people, the reality is far different. Insurers frequently deny valid claims, sometimes by bending the rules, manipulating evidence, or dragging out the process indefinitely.

The majority of LTD cases involve the insurer claiming you are “not disabled enough,” your condition does not meet their definition, or your medical records do not “support” your claim. While these denials are often incorrect or unfair, they are not always considered bad faith under the law. Bad faith arises when the insurer’s conduct consistently favors denial or exhibits a strong pattern of negligence, especially in Individual Disability Insurance (IDI) policies.

A denial can cross into bad faith when the insurer:

• Ignores clear medical evidence supporting your disability
• Misrepresents policy language to justify a denial
• Fails to investigate or uses biased medical reviewers known for denying claims
• Deliberately delays communication or decisions
• Threatens cancellation of your policy without cause
• Offers a lowball settlement far below what is owed, hoping you will give up.

ERISA and Bad Faith

It is important to note that ERISA is a federal statute that preempts (overrides) most state laws that “relate to” employee benefit plans, including state laws that allow for bad faith insurance claims.

Even if an insurer acts unreasonably or dishonestly, plaintiffs cannot sue under state tort law for things like bad faith, fraud, emotional distress, or punitive damages.

The U.S. Supreme Court and federal appellate courts have consistently held that ERISA preempts state-law remedies, including bad faith actions, to maintain uniform standards for employee benefit plans nationwide.

By contrast, non-ERISA insurance policies like individually purchased disability policies (IDIs), are governed by state law, and in those cases, depending on the state:

• Plaintiffs can bring bad faith claims.
• They may recover punitive damages, emotional distress damages, and more expansive remedies through discovery and jury trials.

Individual Disability Insurance and Bad Faith

IDI policies are privately purchased and not subject to ERISA. These policies often promise “own occupation” protection, meaning you should receive benefits if you cannot perform your specific job, even if you can technically work elsewhere. When insurers twist these definitions or delay payment without justification, bad faith litigation is an important option.

Bad Faith in Long-Term Care (LTC) Claims

Long-term care policyholders face their own set of challenges. Bad faith in LTC claims becoming more and more common. Bad faith practices in LTC or LTCI can look like the following:

• Denying claims based on flawed ADL assessments
• Minimizing cognitive impairment symptoms
• Disputing care providers’ qualifications, even when licensed
• Denying coverage due to alleged lapses, often without proper notice
• Prolonged review processes designed to outlast the policyholder.

These tactics are especially cruel given that many LTC or LTCI claimants are elderly, ill, or cognitively impaired, and have no capacity to fight back without legal help.

Why Choose Sandstone Law Group?

When you’re dealing with insurance bad faith, you’re not just facing a denial—you’re confronting a system that is actively working against you. Often these aren’t honest mistakes. They’re strategic, calculated moves by insurers to delay, underpay, or outright deny valid claims. You need more than a law firm—you need a legal team that knows how to call out bad faith for what it is, build a case that proves it, and win.

We Know Bad Faith Inside and Out: We’ve taken on some of the most aggressive long-term disability (LTD) and long-term care (LTC or LTCI) insurers in the country—especially those with a documented history of dishonest tactics. We don’t just handle claims; we pursue accountability through bad faith litigation when insurers cross the line. If your policy is governed by state law (such as an individual LTC or LTCI policy or IDI LTD plan), we can build a case for punitive damages, emotional distress, and financial recovery beyond unpaid benefits.

We Build from the Ground Up: From the first call, we listen—really listen. Then we investigate, document, and build. We know the emotional and financial toll of insurance betrayal, and we treat your case with the urgency and gravity it deserves. We don’t use templates. We build customized strategies based on your policy, your claim history, and the specific bad-faith behavior you’ve experienced.

We Are Litigators—Not Just Negotiators: Insurers know who settles quietly—and who takes them to court. Sandstone Law Group prepares every case as if it will go before a judge and jury. That pressure alone often forces more serious negotiations, but when trial is necessary, our team is courtroom-ready. If your insurer has violated the covenant of good faith and fair dealing, we are prepared to take that fight as far as it needs to go.

We Win, Big: Sandstone Law Group’s track records includes multi-million-dollar verdicts and settlements for clients who were misled, manipulated, or wrongfully denied. Whether through litigation or a strategic settlement, our focus is on full justice—not partial payouts.

We Fight For You Like Family: When you work with Sandstone, your problem becomes our mission. We bring not just legal firepower, but genuine compassion. Our clients feel heard, seen, and most importantly—protected.

How Sandstone Law Group Can Help Your Bad Faith Case

Our attorneys are recognized for their work in long-term disability insurance and long-term care insurance claims, and we bring that same depth of knowledge to every bad faith case we handle. We know what evidence to demand, what patterns to look for, and how to confront insurance companies in a language they cannot ignore: the law.

Here is how we help: