Insurance companies have a legal duty to deal honestly and fairly with their policyholders. When an insurer intentionally or unreasonably fails to do that, it can be held liable for acting in bad faith. In Arizona, that obligation runs through both common law and A.R.S. § 20-461, which outlines unfair claims settlement practices. Courts have long recognized a tort claim for insurance bad faith that goes beyond a simple contract dispute — meaning damages beyond the policy benefits, potentially including emotional distress and, in serious cases, punitive damages.
What bad faith actually looks like
Bad faith isn't an insurer disagreeing with your claim amount. It's a pattern of unreasonable behavior designed to pressure you into accepting less than you deserve or to deny a valid claim entirely. Common examples: sitting on your claim for weeks or months when liability is clear; rejecting a valid claim without a real investigation; misrepresenting policy terms or telling you coverage doesn't exist when it does; making settlement offers that bear no reasonable relationship to your actual damages; failing to respond to calls or documentation requests; requiring repetitive or burdensome proof as a delay tactic; and using pressure to discourage you from pursuing your rights.
Arizona's specific protections
A.R.S. § 20-461 explicitly prohibits failing to acknowledge claims promptly, not attempting in good faith to settle where liability is reasonably clear, and compelling claimants to litigate by offering unreasonably low amounts. The Arizona Department of Insurance also has regulatory authority over insurer conduct — serious violations can have consequences beyond a single lawsuit. The two-year statute of limitations (A.R.S. § 12-542) applies to most personal injury claims, but the timeline for a bad faith claim can vary by case. See our post on the Arizona statute of limitations for detail.
UM/UIM claims and bad faith
Car accident cases are among the most common settings where bad faith behavior surfaces. If you were hit by an uninsured driver and your own insurer is treating you like an adversary on your UM/UIM claim — dragging their feet, disputing clear-cut liability, making token offers — that's a serious red flag. Our post on uninsured motorist coverage in Arizona covers what these claims should look like and what your insurer is actually required to do.
What to do if you suspect bad faith
Keep records of every phone call, letter, email, and interaction with the insurer — dates, times, and what was said. Ask the insurer to put denials, explanations, and offers in writing. Don't accept a lowball offer under pressure; once you sign a release, you can't go back for more. File a complaint with the Arizona Department of Insurance if the conduct is serious — it creates an official record and can prompt regulatory scrutiny.
Our car accident attorneys handle bad faith insurance cases throughout Phoenix and Scottsdale on a contingency fee basis. No fee unless we win. Call (480) 418-SHER (7437) or reach out online.