Policyholders often ask whether an underpaid claim is “bad faith.” Sometimes it is. More often, it’s a genuine disagreement about price or scope. This article describes Virginia’s rules in general terms. It isn’t legal advice, and only a Virginia attorney can evaluate a bad-faith claim.
Two statutes worth knowing
Virginia Code § 38.2-209 allows a court, in certain cases, to award a policyholder costs and reasonable attorney’s fees when it determines that an insurer, not acting in good faith, denied coverage or failed or refused to pay what the policy owes. Courts apply a reasonableness standard and look at the facts of each case.
Virginia Code § 38.2-510 lists unfair claim settlement practices, such as failing to acknowledge communications promptly, failing to adopt reasonable standards for investigating claims, or offering substantially less than amounts ultimately recovered in suits. The Bureau of Insurance enforces this section against insurers. It generally doesn’t create a private lawsuit for individual policyholders.
Why appraisal is different
Appraisal answers one narrow question: the amount of loss. An appraisal panel can’t find bad faith, award attorney’s fees or impose penalties. What appraisal can do is put a binding number on the loss, which sometimes shows how far apart the original offer was. Whether that gap means anything legally is for an attorney.
When to call an attorney first
- The insurer denied the claim outright or rescinded the policy.
- The suit-limitation deadline is approaching.
- The insurer is accusing you of fraud or misrepresentation.
- You’ve been asked for an examination under oath.
- The dispute is about what the policy covers, not what the damage costs.
Filing a complaint
Separately, you can file a complaint about an insurer’s claim handling with the Bureau of Insurance. Our guide on filing a Bureau of Insurance complaint explains how.