Understanding Bad Faith Insurance Law in New Hampshire~4 min read

When you purchase an insurance policy, you expect your insurer to honor its promises when you need coverage most. Whether it’s after a serious car accident, a house fire, or another unexpected loss, policyholders rely on insurance companies to investigate claims fairly and pay valid benefits promptly. Unfortunately, insurers do not always meet these obligations. In some cases, an insurance company may act in “bad faith” by unreasonably delaying, denying, or underpaying a legitimate claim.

Understanding New Hampshire’s approach to bad faith insurance law can help consumers recognize when an insurer’s conduct crosses the line and what legal remedies may be available.

What Is Insurance Bad Faith?

Insurance companies owe their policyholders a duty of good faith and fair dealing. This means they must investigate claims honestly, evaluate the evidence fairly, and make coverage decisions based on the facts and the terms of the insurance policy—not solely on their own financial interests.

Bad faith occurs when an insurer fails to meet these obligations without a reasonable basis. Not every denied claim constitutes bad faith. Insurance companies have the right to dispute claims where coverage is genuinely questionable. However, when an insurer lacks a reasonable justification for its actions or intentionally mishandles a claim, it may be liable for damages beyond the policy benefits.

Examples of conduct that may constitute bad faith include:

• Denying a valid claim without conducting an adequate investigation.
• Unreasonably delaying payment of covered benefits.
• Misrepresenting policy language or coverage.
• Failing to communicate with policyholders regarding claim status.
• Offering settlements far below the reasonable value of a claim without justification.
• Ignoring evidence supporting coverage.

New Hampshire’s Legal Framework

New Hampshire recognizes claims for insurance bad faith under both common law and statutory law. Courts have long acknowledged that insurers owe policyholders a duty to act fairly when handling claims.

In addition to common law remedies, insurers must comply with New Hampshire’s insurance regulations governing unfair claim settlement practices. While not every regulatory violation automatically creates a private lawsuit, evidence that an insurer violated these standards may support a bad faith claim.

The central question in many bad faith cases is whether the insurer acted reasonably under the circumstances. Courts generally examine whether the insurer had a legitimate basis to deny or delay the claim and whether it conducted a thorough and impartial investigation.

First-Party vs. Third-Party Bad Faith

Bad faith claims generally fall into two categories.

First-Party Bad Faith

A first-party claim arises when a policyholder seeks benefits under his or her own insurance policy. Common examples include homeowners, automobile, disability, and property insurance claims.

If an insurer unreasonably refuses to pay benefits owed directly to its insured, the policyholder may have grounds to pursue a bad faith action.

Third-Party Bad Faith

Third-party bad faith typically involves liability insurance. For example, if an insurer refuses to settle a claim against its insured within policy limits when it reasonably could have done so, exposing the insured to an excess judgment, the insurer may be liable for acting in bad faith.

These cases often arise in automobile accident and general liability litigation.

Proving a Bad Faith Claim

Successfully pursuing a bad faith claim requires more than showing that an insurance company made a mistake. The policyholder generally must demonstrate that:

• The claim was covered under the policy or otherwise reasonably payable.
• The insurer lacked a reasonable basis for denying or delaying benefits.
• The insurer knew or should have known that its conduct was unreasonable.
• The policyholder suffered damages as a result.

Evidence frequently includes claim correspondence, internal claim handling documents, expert testimony, adjuster notes, medical records, repair estimates, and the insurer’s investigation timeline.

Potential Damages

When bad faith is established, policyholders may recover more than the value of the underlying insurance claim.

Depending on the circumstances, recoverable damages may include:

• Unpaid policy benefits.
• Financial losses caused by the delay or denial.
• Consequential damages resulting from the insurer’s conduct.
• Interest on unpaid benefits.
• Additional damages where authorized by law.

Each case depends on its unique facts and the applicable legal theories.

Common Insurance Disputes

Bad faith allegations can arise across many types of insurance claims, including:

• Automobile accidents.
• Homeowners insurance.
• Commercial property losses.
• Business interruption claims.
• Disability insurance.
• Health insurance.
• Life insurance.
• Fire and water damage claims.

In many of these cases, insurers may rely on policy exclusions, causation disputes, or valuation disagreements. While legitimate disputes are permissible, insurers must still investigate thoroughly and evaluate claims fairly.

What Should Policyholders Do?

If you believe your insurer has acted unfairly, maintaining thorough documentation is essential. Keep copies of your insurance policy, correspondence, repair estimates, photographs, medical records, and notes regarding communications with adjusters.

Promptly responding to requests for information and carefully reviewing any denial letter may also help identify the insurer’s stated reasons for refusing coverage.