Insurance Bad Faith Victory: Nevada Court Affirms $160M Award, Michigan Reviews Garnishment Rights

Insurance bad faith enforcement achieved major victories with courts holding insurers accountable for unreasonable claim handling. The Nevada Supreme Court's $160 million affirmation sends a powerful message: insurers must treat policyholders fairly.

Nevada Supreme Court: $160 Million Bad Faith Award

Sierra Health & Life Insurance Case

The Nevada Supreme Court affirmed one of the largest bad faith awards in recent history—$160 million against Sierra Health & Life Insurance.

What the Insurer Did Wrong

• •Unreasonably denied covered medical treatment
• •Failed to properly investigate claims
• •Delayed payments without justification
• •Prioritized profits over policyholder welfare
• •Ignored medical necessity determinations

Why the Award Was Upheld

The court found:

• •Clear evidence of bad faith conduct
• •Insurer knew or should have known denial was wrong
• •Pattern of unreasonable claims handling
• •Policyholder suffered significant harm
• •Punitive damages appropriate to deter future conduct

Significance

This ruling:

• •Confirms insurers can face massive liability for bad faith
• •Demonstrates courts will protect policyholders
• •Sends deterrent message to insurance industry
• •Validates Nevada's strong consumer protection laws

Michigan Supreme Court: Garnishment Rights

The Question

Can judgment creditors use garnishment writs to pursue insurers for bad faith refusal to settle?

Why It Matters

When insurers unreasonably refuse settlement offers within policy limits:

• •Policyholder may face excess judgment
• •Insurer's bad faith caused the harm
• •Third party (judgment creditor) may have claim against insurer

Potential Outcomes

If the court rules for garnishment rights:

• •Insurers face greater accountability
• •Injured parties gain recovery avenue
• •Insurers incentivized to settle reasonably
• •Expands bad faith enforcement tools

Current Status

Decision expected 2025 - watch for significant impact on insurance practices.

California Supreme Court: Homeowner UCL Claims

The Ruling

California Supreme Court strengthened consumer protection by ruling homeowner Unfair Competition Law (UCL) claims aren't barred by contractual limitations.

What This Means

• •Homeowners can pursue UCL claims beyond contract limitations
• •Applies when seeking broad public interest relief
• •Insurance companies can't hide behind policy language
• •Expands remedies for systemic bad practices

Understanding Insurance Bad Faith

What Is Bad Faith?

Bad faith occurs when an insurer unreasonably:

• •Denies valid claims
• •Delays payment without justification
• •Fails to investigate properly
• •Refuses to defend policyholders
• •Misrepresents policy terms
• •Fails to settle within limits when it should

Types of Bad Faith

First-Party Bad Faith (your own policy):

• •Health insurance claim denials
• •Property damage underpayment
• •Disability benefit denials
• •Life insurance claim delays

Third-Party Bad Faith (liability insurance):

• •Failing to defend you in lawsuit
• •Refusing reasonable settlement
• •Exposing you to excess judgment
• •Not informing you of settlement offers

Common Bad Faith Practices

Claim Denial Tactics

| Tactic | What They Do | |--------|--------------| | Delay, delay, delay | Hope you give up or miss deadlines | | Request excessive documentation | Create barriers to claims | | Misrepresent coverage | Claim something isn't covered when it is | | Lowball offers | Offer fraction of actual value | | Deny without investigation | Reject before gathering facts | | Blame pre-existing conditions | For health/disability claims |

Auto Insurance Bad Faith

Common violations:

• •Delaying treatment authorization
• •Forcing you to use their "preferred" shops
• •Undervaluing total loss vehicles
• •Denying rental car coverage
• •Disputing medical necessity
• •Pressuring low settlements

Property Insurance Bad Faith

Common violations:

• •Undervaluing damage
• •Claiming excluded perils
• •Slow inspection response
• •Ignoring contractor estimates
• •Depreciation games
• •Denying additional living expenses

Health Insurance Bad Faith

Common violations:

• •Prior authorization delays
• •Retrospective claim denials
• •Medical necessity disputes
• •Out-of-network penalties
• •Step therapy requirements
• •AI-driven denials (see California SB 1120)

Proving Bad Faith

Elements Required

To win a bad faith claim, you generally must show:

• •Valid Claim: You had a legitimate covered claim
• •Wrongful Withholding: Benefits were unreasonably withheld
• •Unreasonable Conduct: Insurer's behavior was unreasonable under totality of circumstances
• •Damages: You suffered harm from the bad faith

Evidence to Gather

• •All correspondence with insurer
• •Claim file (request under state law)
• •Medical records and bills
• •Repair estimates
• •Documentation of delays
• •Names of adjusters and representatives
• •Notes from all phone calls
• •Industry standards for claims handling

State Bad Faith Laws

Strong Consumer Protection States

Nevada (NRS 686A.310):

• •Requires insurers to protect policyholders
• •Damages paid directly to consumers
• •Overcapitalization requirements enforced
• •Strong enforcement mechanism

California:

• •Broad bad faith recognition
• •Punitive damages available
• •UCL claims for patterns
• •Insurance Commissioner enforcement

Montana:

• •Statutory bad faith cause of action
• •Attorney fees recoverable
• •Punitive damages available

Weaker Protection States

Some states:

• •Require "intentional" bad faith
• •Cap damages
• •Have higher proof standards
• •Limit punitive damages

How to Fight Insurance Bad Faith

Step 1: Document Everything

Keep records of:

• •Every communication (emails, letters, calls)
• •Dates you submitted documents
• •Response times from insurer
• •Names of everyone you spoke with
• •What was said in each conversation
• •All claim numbers and reference codes

Step 2: Know Your Policy

• •Read your policy thoroughly
• •Understand coverage and exclusions
• •Note all deadlines and requirements
• •Identify your duties after a loss
• •Know claim procedures

Step 3: Request Your Claim File

Most states require insurers to provide:

• •All documents in your claim file
• •Internal notes and communications
• •Valuation reports
• •Investigation materials

Step 4: File Internal Appeal

Follow your policy's appeal process:

• •Submit written appeal with documentation
• •Address specific reasons for denial
• •Include supporting evidence
• •Meet all deadlines

Step 5: File Regulatory Complaint

Contact your state Department of Insurance:

• •File formal complaint
• •Provide documentation
• •Request investigation
• •Ask about mediation programs

Step 6: Consult a Bad Faith Attorney

Consider legal help when:

• •Claim involves significant amount
• •Insurer acting unreasonably
• •Appeals unsuccessful
• •Pattern of problematic behavior
• •Need expert evaluation

Sample Bad Faith Complaint Letter

 [Date]


[Insurance Company] [Claims Department Address]

RE: Claim Number [X] - Notice of Bad Faith Claim Handling

Dear Claims Manager:

I am writing regarding the unreasonable handling of my claim [number]  submitted on [date].

CHRONOLOGY OF BAD FAITH CONDUCT:

[Date]: I submitted claim for [describe covered loss].

[Date]: Insurer failed to [investigate/respond/pay] within [state  required timeline].

[Date]: Despite submitting [documentation], insurer [denied/delayed/ undervalued] without adequate explanation.

[Date]: [Additional examples of unreasonable conduct]

This conduct constitutes bad faith under [state law/NRS 686A.310/ California law/etc.] because:


•My claim is clearly covered under policy section [X].
•The insurer failed to [investigate/respond/pay] in good faith.
•The stated reasons for [denial/delay/undervaluation] are pretextual.
•I have suffered [damages: out-of-pocket costs, interest, emotional

   distress, etc.].

I demand:

•Immediate payment of the full claim amount: $[X]
•Interest from date claim should have been paid
•Reimbursement of costs incurred due to delay: $[X]


If this matter is not resolved within [30 days], I will pursue all  legal remedies including bad faith litigation and regulatory complaints.

Sincerely, [Your Name] [Policy Number] [Contact Information]

cc: [State Department of Insurance]     [Attorney, if applicable] 

Damages Available

Compensatory Damages

• •Actual policy benefits owed
• •Interest on delayed payments
• •Additional costs from delay
• •Consequential damages
• •Emotional distress (in many states)

Punitive Damages

Available when insurer:

• •Acted with malice or fraud
• •Showed conscious disregard for rights
• •Engaged in pattern of abuse
• •Amount varies by state

Attorney Fees

Many states allow recovery of:

• •Reasonable attorney fees
• •Litigation costs
• •Expert witness fees

Resources

Regulatory Resources

• •State Insurance Departments: naic.org/state_web_map.htm
• •NAIC Consumer Help: naic.org/consumer.htm

Legal Resources

• •American Association for Justice: justice.org
• •State Bar Referral Services
• •Consumer Law Attorneys

Consumer Advocacy

• •United Policyholders: uphelp.org
• •Consumer Federation of America: consumerfed.org
• •National Association of Insurance Commissioners: naic.org

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The $160 million Nevada verdict demonstrates that courts will hold insurers accountable for bad faith. If your insurer is unreasonably denying, delaying, or undervaluing your claim, document everything, appeal through proper channels, file regulatory complaints, and consider consulting an attorney. Bad faith law exists to ensure insurers honor their promises.