TL;DR
- A bad-faith insurance case in Maryland is usually about whether the insurer acted with an absence of good faith, not whether the carrier was merely wrong. Maryland’s statutory definition of “good faith” focuses on honesty, diligence, and evidence the insurer knew or should have known at the time of decision.
- This page analyses three practical insurance problems: denial, disclaimer, and soft denial through undervaluation.
- In Maryland, a policyholder may still have a traditional breach of contract claim even when bad faith is not proven; bad faith matters because it can affect additional remedies, including attorney’s fees and litigation costs in qualifying first-party cases.
- Maryland’s unfair-claims-settlement rules prohibit things like misrepresenting pertinent facts or policy provisions, refusing to pay for arbitrary or capricious reasons, and failing to explain the basis for a denial.
- In ordinary personal injury cases, the other side usually does not pay your lawyer’s fees because of the American Rule
How Insurance Claim Denials and Bad Faith Disputes Arise
Insurance disputes rarely begin with the phrase “bad faith.” Most begin with a denial, a low offer, or a dispute about the policy.
All Insurance Disputes Share the Same Core Conflict, and I litigate them all.
The articles below explain the most common ways those disputes arise and how they are challenged.
Baltimore Insurance Denial Lawyer Tip #142
Maryland evaluates insurance bad faith by examining whether the insurer acted with honesty, diligence, and an informed judgment when handling a claim. Bad faith is not simply a wrong decision. It concerns whether the claim was handled through a flawed process, careless investigation, or unsupported conclusions.
What is insurance bad faith in Maryland?
Short answer
In Maryland, insurance bad faith generally means an absence of good faith in the handling of an insurance claim. The focus is on whether the insurer made an informed decision based on honesty, diligence, and the evidence available when the claim decision was made.
Explanation
Maryland approaches bad faith by examining the insurer’s claim-handling process rather than simply asking whether the outcome was correct. The central question is whether the insurance company acted honestly, conducted a reasonable investigation, and relied on evidence it knew or should have known when deciding the claim. Because this framework primarily applies to first-party claims, it typically involves disputes between a policyholder and their own insurance company regarding how the claim was evaluated and decided.
What Does an Insurance Claim Denial Lawyer Actually Do?
A Baltimore insurance claim denial lawyer reviews the policy, investigates the cause of loss, analyzes the insurer’s denial letter, and challenges the insurance company’s decision when the denial conflicts with the policy language or the available evidence.
These disputes often involve coverage interpretation, valuation disagreements, or claim-handling practices that may require negotiation or litigation to resolve. Insurance companies can deny or underpay claims based on policy exclusions, disputed damage causes, or valuation disagreements. Challenging those decisions requires careful analysis of the policy language, documentation of the loss, and comparison of the insurer’s explanation to the available evidence. When those explanations do not align with the facts or the policy, the denial can be challenged through negotiation or litigation.
👉 Read the full guide: Baltimore Insurance Claim Denial LawyerWhat Happens When an Insurance Company Denies My Claim?
When an insurance company denies a claim, the dispute usually centers on whether the denial is supported by the insurance policy and the available evidence. They have to prove it is.
A denial does not automatically mean the claim lacks merit. Many disputes arise from disagreements about coverage interpretation, the cause of damage, or the value of the loss. Insurance carriers may rely on policy exclusions, investigation results, or documentation disputes when refusing payment. In many cases, however, the denial is based on a contested interpretation of the policy language or an incomplete investigation. A denied claim can often be challenged by examining the insurer’s reasoning and comparing it to the actual policy provisions and the factual record.
👉 Read the full article: What Happens When the Insurance Company Denies My Claim?Baltimore Insurance Denial Lawyer Tip #318
Insurance companies use several mechanisms to avoid paying the full value of a claim. The most common are denial, disclaimer, and undervaluation. Each operates differently, but the financial effect for the insured person is often the same: reduced or delayed payment.
What is the difference between a denial, a disclaimer, and an undervaluation?
Short answer
A denial refuses payment entirely, a disclaimer asserts that the policy does not apply because of a policy defense, and an undervaluation accepts the claim but assigns it an artificially low value.
Explanation
A denial occurs when the insurer refuses to pay the claim at all. A disclaimer typically relies on a policy defense such as late notice, alleged fraud, or non-cooperation. Undervaluation functions as a softer version of denial: the insurer acknowledges the claim but offers a payment far below the actual loss. In practice, insurance companies often use these approaches interchangeably. The label may change, but the effect is the same—pressure on the insured person to accept less than the claim is worth.
What If an Insurance Company Wrongfully Refuses to Pay a Claim?
When an insurance company refuses to pay a claim without a legitimate policy-based reason, the dispute may escalate beyond ordinary negotiation. The “appeal” of these wrongful decisions is by way of filing a lawsuit.
Insurance disputes often involve disagreements about what the policy covers and how the loss occurred. If the insurer’s refusal to pay conflicts with the policy terms or the evidence supporting the claim, the dispute may require formal challenge. Wrongful refusals can occur when the insurer relies on unsupported conclusions, misinterprets policy language, or conducts an inadequate investigation of the claim. In some cases, litigation becomes necessary to resolve the disagreement and determine whether the insurer’s conduct complied with Maryland law.
👉 Read the full article: What If a Baltimore Insurance Company Wrongfully Refuses to Pay My Claim?What Happens If the Insurance Company Refuses to Offer Policy Limits?
Insurance disputes sometimes arise when a carrier refuses to offer the full policy limits – despite evidence suggesting that the claim may exceed those limits. The method to challenge such an adverse decision is to file a lawsuit and let a jury or judge determine the fair value of the claim.
When insurers decline to offer policy limits in cases involving substantial damages, the dispute can become more complex. Settlement negotiations, liability analysis, and litigation strategy all influence how these cases proceed. In those situations, the disagreement might shift from the value of the claim itself to the insurer’s settlement decisions and the potential consequences of refusing to resolve the case. The question can become not only what the claim is worth but whether the insurer’s settlement position is reasonable under the circumstances.
👉 Read the full article: What Happens If an Insurance Company Does Not Offer Its Policy Limits?Baltimore Insurance Denial Lawyer Tip #207
Challenging an insurance denial requires more than arguing with the adjuster. It requires analyzing the policy, investigating the loss, reconstructing the evidence, and forcing the dispute back onto the factual record rather than the insurer’s narrative.
What does a bad-faith insurance lawyer actually do?
Short answer
A bad-faith insurance lawyer reviews the insurance policy, investigates the cause of loss, evaluates the insurer’s denial against Maryland law, and challenges unsupported claim decisions through negotiation, administrative procedures, or litigation.
Explanation
The process typically begins with a detailed policy analysis to determine coverage and exclusions. The next step is an independent investigation of the loss, which may involve engineers, contractors, adjusters, or other experts depending on the claim. Documentation is then assembled to reconstruct the factual record of the claim. From there the dispute often proceeds through demand letters, negotiation, and—if necessary—litigation. The goal is to correct the insurer’s narrative and ensure that the claim is evaluated based on the policy language and the evidence.
Does the Insurance Company Have to Pay My Lawyer’s Fees?
In most civil cases in the United States, each party pays their own attorney’s fees unless a statute or contract provides otherwise. This principle is commonly known as the “American Rule.”
Many people assume that the losing side must pay the other party’s attorney’s fees. In reality, the American Rule generally requires each party to pay their own legal costs unless a specific law or contractual provision allows fee shifting. This means that the at-fault driver or their insurer typically does not automatically pay the injured person’s legal fees, and that an insurance company that loses a breach of contract case does not automatically pay the other side’s attorney’s fees. Understanding that principle helps clarify how insurance claims and personal injury litigation are structured.
👉 Read the full article: Does the At-Fault Driver or Their Insurance Have to Pay My Lawyer’s Fees?Baltimore Insurance Denial Lawyer Tip | 1
Maryland’s bad faith statute provides for fee shifting. In other words, if an insured person successfully sues their insurance company and demonstrates that the company acted in bad faith, the insured may recover their attorney’s fees and litigation costs from the insurance company.
Can a Maryland policyholder recover attorney’s fees in a bad faith insurance case?
Short answer
Yes. Maryland’s bad faith statute allows successful policyholders to recover attorney’s fees and litigation costs when they prove that their insurance company acted in bad faith when handling a claim.
Explanation
Maryland generally follows the American Rule, meaning each party pays their own legal fees. However, Maryland’s first-party bad faith statute creates an exception. When an insured person proves that an insurer failed to act in good faith when denying or underpaying a claim, the court may award attorney’s fees and litigation expenses in addition to the policy benefits owed.
How Insurance Companies Attempt to Reduce the Value of Claims
Insurance companies frequently challenge the value of claims by disputing medical evidence, questioning liability, minimizing damages, or arguing that injuries were caused by unrelated factors. These valuation disputes often become a central issue in personal injury and insurance litigation.
These valuation disputes often become a central issue in personal injury and insurance litigation. Claim value is influenced by medical documentation, liability evidence, insurance coverage limits, and the strength of the supporting records. Insurance companies often evaluate these factors aggressively -and differently than you might- during negotiations. Understanding how those valuation decisions are made helps injured individuals recognize when a claim is being undervalued.
👉 Read the full article: How to Enhance the Value of Your Baltimore Personal Injury Case| Insurance Company Move | What It Usually Sounds Like | Why It Matters Legally |
|---|---|---|
| Policy-based denial | “This loss is not covered.” | Raises breach-of-contract and policy-interpretation issues; may also support bad-faith analysis if the coverage position was not informed, honest, or diligent. |
| Disclaimer based on conduct | “You gave late notice,” “you failed to cooperate,” or “we suspect fraud.” | Shifts the dispute from the loss itself to conditions, notice, cooperation, or credibility. |
| Undervaluation / soft denial | “We approved the claim, but only for this limited amount.” | The claim is nominally accepted but practically underpaid; often challenged through independent estimates, corrected documentation, and litigation leverage. |
| Failure to investigate | Minimal inspection, selective review, or reliance on a preferred narrative. | Directly affects whether the insurer used honesty, diligence, and available evidence in reaching its decision. |
| Failure to explain | Vague denial letter or no real basis for the result. | Supports unfair-claims-settlement arguments where the insurer fails to provide a reasonable explanation. |
| Policy-limits refusal | “We are not offering limits.” | Can implicate settlement-duty issues where liability and damages indicate the claim should have been resolved within limits. |
| Step | What Gets Built | Why It Matters |
|---|---|---|
| Policy analysis | Coverage, exclusions, conditions, endorsements, notice provisions. | The case starts with the contract the insurer sold. |
| Cause-of-loss investigation | Experts, contractors, engineers, adjusters, collision specialists, photos, weather data. | Bad faith often turns on what the insurer knew or should have known about the real cause and extent of loss. |
| Document reconstruction | Claim letters, estimates, medical bills, invoices, prior repairs, correspondence, reports. | The paper record is often where the carrier’s position starts to unravel. |
| Demand and correction | A corrected factual and legal presentation to the insurer. | Gives the insurer a chance to fix a bad position before suit escalates the dispute. |
| Administrative route where required | Maryland first-party bad-faith process where applicable. | The statutory path matters; not every bad-faith theory begins the same way. |
| Litigation | Contract claim, statutory claim, related settlement-duty issues, fee consequences where available. | This is where unsupported denials and underpayments get measured against proof. |
FAQ — Insurance Bad Faith Questions
Insurance bad faith generally refers to an insurer handling a claim without honesty, diligence, or reasonable investigation. As a practical matter, that legal definition often results in a two-prong analysis: Can the insurance company offer justification for what they did or did not do? If the answer to this is no- the specter of bad faith is raised. If the insurance company does offer an explanation, then that conduct is examined to see if it’s one based on honesty diligence and actual facts.
Yes. Insurance companies deny claims that are later proven to be valid in court, or settle before court. I have handled thousands of cases where an insurance company initially denied the claim, or offered an unreasonably low settlement, where a greater financial recovery was obtained. Insurance companies sometimes deny claims based on policy exclusions, investigation results, or disputed facts. When those reasons are unsupported, the denial can be challenged potentially by bad faith arguments in addition to breach of contract
Insurance payments are delayed all the time. The question is whether the delay is intentional. Delays may occur during claim investigations. However, unreasonable delays can become part of a larger dispute over claim handling. A series of unreasonably late payments without a valid explanation can be used as evidence of bad faith.
Start by reviewing the policy language and the insurer’s explanation. Many disputes arise from disagreements over coverage interpretation or valuation. If your insurance company chooses to rely on an exclusion in the policy they have to prove it is warranted. When you receive the denial letter is often when the “should I hire” a lawyer discussion is held.
Usually, yes. Maryland’s Courts Article says a party generally may not file an action under the bad-faith statute before there is a final decision under Insurance Article § 27-1001. The main exceptions are small-claim cases, cases where the insured and insurer waive that requirement, and certain large-limit commercial-policy claims.
If the insured wins and the trier of fact finds the insurer failed to act in good faith, Maryland law allows recovery of actual damages up to the policy limits, plus litigation expenses and costs including reasonable attorney’s fees, plus interest on actual damages, expenses, and litigation costs.
What is the difference between breach of contract and bad faith?
A breach-of-contract claim asks whether the insurer owed coverage or payment and failed to provide it. A bad-faith claim asks whether the insurer’s claim handling also lacked the required honesty, diligence, and evidentiary support.
These are distinct concepts under Maryland law. An insured who has had their claim wrongfully denied by an insurance company for policy reasons, can successfully sue that insurance company in a run of the mill breach of contract action for the damages that they were entitled to collect under their insurance policy. In the absence of bad faith- they would pay their own attorneys fees necessary to secure that victory. If, after complying with administrative exhaustion requirements, that insured person can show that the insurance company did not act in good faith, but acted arbitrarily or capriciously and could not justify the actions they took, that insured person can recover not only the value of their damages, but also their attorneys fees and litigation costs.
Baltimore Insurance Dispute Lawyer Tip #22
A bad-faith claim is not the same thing as an ordinary coverage or breach-of-contract dispute.
Short answer: In Maryland, bad faith is an added layer of wrongdoing. It is not automatically established just because the insurer denied the claim or got the coverage decision wrong.
Maryland’s statute treats bad faith as an additional allegation on top of the dispute over coverage or the amount owed, and it also says an insurer cannot be found to have acted in bad faith solely because of delay if the insurer acted within the time allowed by statute or regulation.
Can a delay alone prove bad faith?
Not automatically. Delay is not, by itself, the whole analysis if the insurer acted within applicable time periods. But delay can still matter, especially when it reflects deeper investigative or claim-handling failures.
What documents might matter most in a bad-faith insurance case?
Policy documents, denial letters, estimates, photographs, weather data, expert reports, medical records where relevant, correspondence, and anything showing what the insurer knew or should have known at the time it made the decision.
Baltimore Insurance Denial Lawyer Tip #456
Insurance companies cannot simply deny claims without explanation. Maryland law requires insurers to provide legitimate reasons for their decisions and prohibits arbitrary or unsupported claim denials.
Does the insurance company have to give a real reason to deny a claim?
Short answer
Yes. Maryland law does not allow arbitrary or capricious claim denials. An insurance company must have a legitimate reason grounded in the policy and the evidence supporting the claim decision.
Explanation
Insurance carriers typically issue a written explanation when denying or underpaying a claim. The real issue, however, is whether the stated reason is legitimate and supported by the policy language and the facts. Maryland’s unfair claim settlement rules prohibit insurers from misrepresenting policy provisions, refusing payment without a reasonable basis, or failing to explain the reasons for a denial. A reason written on paper does not automatically make the denial lawful if the explanation does not match the evidence or the contract.
How To Challenge a Denied Insurance Claim.
Denied insurance claims come in two forms: The Frank denial– this is an outright rejection of all responsibility for the claim. The insurance company has to give you a reason. The Soft denial– this is more insidious. Here, the insurance company accepts responsibility for a small portion of the related damages and rejects the rest- leaving the injured person or homeowner with insufficient funds to compensate them.
- Review the Insurance Policy
Understand the coverage, exclusions, and conditions in the contract. Every Insurance dispute case starts with a detailed policy analysis and bad faith claims in Maryland or no different.
- Gather Supporting Evidence
Documentation, photographs, and expert reports will determine how disputes unfold. If the insurance company can point to factually verifiable objective information on which it based its decision- disputes a resolved along a breach of contract analysis. If on the other hand the insurance company acted- but is unable to articulate the reasons for their actions- the claim will likely track along bad faith lines.
- Evaluate the Insurer’s Explanation
Compare the insurer’s reasoning with the actual policy language, and facts. “Maintenance,” “wear and tear,” “not sudden,” “no permanent injury,” “not enough damage,” and “not covered” are labels. The analysis here relates directly to step two. Is the explanation based on facts and logical extrapolations from those facts? Insurance companies tend to characterize and label many events is “facts of loss”. The issue is whether the facts and the policy actually support those labels.
- Challenge
Never let a claims adjuster dictate what your case is worth. Do not let the carrier’s preferred version become the only version. Contractors, engineers, collision specialists, photos, weather records, medical records, and independent estimates matter. It’s tempting to think of your own insurance company as your “friend”, a good neighbor, or someone who is always there. Don’t fall into that trap. The insurance company is your adversary.
- Litigate
When negotiations fail, a lawsuit is the only viable option.
Traditional contract claims, first-party bad-faith procedures, and settlement-duty problems do not all use the same route. The legal theory controls the path. In first-party Maryland bad-faith matters, the administrative path also matters because the statute does not treat those cases like ordinary free-standing tort claims filed from scratch in circuit court. Contract actions are typically filed after the contract is breach when damages become known. Bad faith actions must be first filed as an administrative proceeding with the Maryland Insurance Administration.
Related Bad Faith Guides
Baltimore Insurance Claim Denial Lawyer
How To Enhance the Value of Your Baltimore Personal Injury Case
What Happens If an Insurance Company Does Not Offer Its Policy Limits?
What Happens When the Insurance Company Denies My Claim?
Does the At-Fault Driver or Their Insurance Have to Pay My Lawyer’s Fees?
What If a Baltimore Insurance Company Wrongfully Refuses to Pay My Claim?
What a Bad Faith Challenge Looks Like
| Stage | What Happens | Purpose |
|---|---|---|
| Policy Review | The insurance policy is analyzed. | Determines coverage obligations. |
| Investigation | Evidence regarding the claim is gathered. | Clarifies the cause and scope of the loss. |
| Demand | A formal request for payment is made. | Initiates settlement negotiations. |
| Negotiation | The parties attempt to resolve the dispute. | Avoids litigation when possible. |
| Litigation | A lawsuit is filed if the dispute cannot be resolved. | Allows a court to decide the issue. |
Contact A Maryland Bad Faith Insurance Lawyer
- Baltimore Personal Injury Trial Lawyer
- Legal Analysis & Case Studies
- Baltimore Insurance Claims Denial Lawyer
For over three decades, I have battled against the nation’s largest insurance companies, always endeavoring to ensure my clients receive the compensation they deserve. As lead counsel in thousands of cases across Maryland, New York, and Florida, I have recovered millions for clients whose claims were wrongfully denied and delayed. Whether denying fair compensation for a personal injury victim or denying benefits to a homeowner, Insurance companies employ policy exclusions, technicalities, and lowball offers to deny and defeat claims. They also hire very good lawyers to fight you in court. So should you. When an insurance company unfairly rejects a claim, I stop them.
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