What is insurance bad faith in the US?
Bad faith is an insurer's unreasonable denial, delay, or underpayment of a valid claim. Every state recognizes an implied covenant of good faith and fair dealing. First-party bad faith (against your own insurer) can expose the insurer to extra-contractual and punitive damages beyond the policy limits.
How much can I recover for insurance bad faith?
You can recover the withheld benefit, consequential and emotional distress damages, attorney's fees in many states, and punitive damages. Punitive damages punish egregious conduct but are constitutionally limited — State Farm v. Campbell (2003) indicates single-digit ratios to compensatory damages are usually the outer limit.
What is the punitive damages ratio limit?
The US Supreme Court in State Farm v. Campbell suggested that punitive damages should generally not exceed a single-digit multiple of compensatory damages, and a 4:1 ratio is often cited as a benchmark. Larger ratios may be allowed where compensatory damages are small but the conduct is especially reprehensible.
Does ERISA allow bad-faith damages?
No. If your disability or health plan is governed by ERISA (most employer group plans), federal law preempts state bad-faith claims. You cannot recover punitive or emotional distress damages — only the benefit owed plus, in some cases, attorney's fees. Individually purchased policies are governed by state bad-faith law.