Bad Faith and Breach of Contract: Do They Differ?

Posted on March 1, 2024


Frances Badayos | author

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ICHQ | Site Author

No one likes it when someone doesn’t keep their word. This is even more frustrating when you have a formal agreement with another party like your insurer.

When pursuing justice in such cases, the terms “bad faith” and “breach of contract” are likely to arise. Are these the same? What are the requirements for filing these lawsuits?

The answers to these questions affect how you can fight for compensation. Learn the facts and discover how our bad faith lawyers at Insurance Claim HQ can assist those who suffer a breach of contract in Louisiana.

The Key Difference Between Bad Faith and Breach of Contract Claims

Both bad faith and breach of contract refer to a party not fulfilling the terms of a mutually accepted agreement. The difference between the two usually comes down to intent.

A breach involves any failure to meet the terms of a contract, whether or not it was intentional or malicious. However, acting in bad faith signifies acting in an improper and dishonest manner. Therefore, a bad faith claim is a specific type of contract breach involving egregious actions.

As a result, the penalties for a simple breach of contract might be straightforward because they focus on restoring the harmed party to a position they were in had the breach not occurred and the error might have been an honest mistake. On the other hand, bad faith claims can incur stiff punitive or exemplary damages for the malicious action.

This serves to discourage others from acting similarly.

When You May Need To File a Bad Faith or Breach of Contract Claim

Contract disputes do not only involve sizable transactions that large companies and wealthy business owners conduct. Commonly, bad faith and breach of contract cases arise because of rejected or unpaid insurance claims.

After paying insurance premiums for years, you are likely confident that your coverage will handle an emergency.

Unfortunately, you may learn that the company has denied your claim due to an odd interpretation of the wording in your policy or a recent change you were unaware of. In such cases, you’ll likely have to go to court to resolve the dispute.

As the plaintiff, you usually accuse the insurance company of bad faith or breach of contract. The standards for filing such suits vary by state, so you need a law firm from your area that understands the statutes regarding such claims. These are issues we focus on at Insurance Claim HQ, and we serve residents in the New Orleans area and locations throughout the South and coastal states.

What You Need To Prove in a Case of Bad Faith

The key to winning a bad faith case is proving that the insurance company used an illegitimate excuse to deny or reduce your claim. In such circumstances, an insurer might not reject your claim outright, but it could offer a lowball settlement that won’t cover what your policy says it should.

The action of bad faith and breach of contract could occur while investigating, adjusting or settling your claim. Such activity includes:

  • Misrepresenting the facts or policy provisions
  • Failing to pay you promptly
  • Altering a provision in the policy without notifying you
  • Misleading you about the process for when to file a claim or initiate legal proceedings

Remember that you must establish that the insurer did not have a valid reason to reduce or deny your payout. If the insurer can verify that it had good reasons for its actions, a court would rule in its favor.

The Time Limit for Filing Claims for Bad Faith or Breach of Contract in Louisiana

Recently, the Louisiana Supreme Court clarified how long you have to file a bad faith or breach of contract claim in Wilson v. Louisiana Citizens Property Insurance. While state law typically allows 10 years to pursue justice for breach of contract, the parties to a contract can agree to shorter periods as long as the agreement doesn’t violate public policy.

Louisiana also has a revised statute that permits insurance companies to limit the right to sue to two years. Previous rulings had conflicting interpretations of this, but the unanimous decision in 2024 upholds the two-year timeframe.

This detail is important because it means you must move quickly if you suspect your insurer acted in bad faith when settling your claim.

Contact Insurance Claims HQ for Help With Claims of Bad Faith and Breach of Contract

You may be at a loss for what to do when your insurance company unjustly denies your claim. However, you don’t have to fret about fighting your case alone.

Our team founded Insurance Claims HQ to stand on the side of policyholders in Louisiana who need to hold insurance providers accountable. Contact us online for help with your bad faith case.