Why a Demand Letter Matters
A bad faith demand letter serves multiple critical purposes:
- Creates a written record of the insurer's misconduct and your objections
- Demonstrates your seriousness and willingness to pursue legal action
- Satisfies notice requirements that some states require before filing suit
- Opens settlement discussions while positioning you for litigation
- Preserves evidence of what the insurer knew and when they knew it
Many insurance disputes settle after a compelling demand letter, without the need for expensive litigation. Even if litigation becomes necessary, a strong demand letter frames the issues and demonstrates your understanding of the law.
Essential Elements of a Bad Faith Demand Letter
Start with clear identification:
- Your name and contact information
- Policy number and claim number
- Date of loss or incident
- Type of coverage at issue
Provide a clear, chronological narrative of:
- The underlying loss or claim
- When and how you reported the claim
- Communications with the insurer
- The insurer's actions (or inactions)
- The current status of your claim
Be factual and specific. Include dates, names of adjusters, and reference specific documents. Avoid emotional language or exaggeration, as this undermines credibility.
Explain why the insurer's conduct constitutes bad faith:
- Cite the implied covenant of good faith and fair dealing
- Reference specific unreasonable conduct
- Identify violations of state insurance regulations
- Explain how the conduct breached the insurer's duties
In California demand letters, cite specific provisions of the Fair Claims Settlement Practices Regulations (Cal. Code Regs. tit. 10, section 2695.1 et seq.) that were violated. Common violations include:
- Section 2695.5(e) - Failure to affirm or deny coverage within 40 days
- Section 2695.7(b) - Failure to provide written explanation for denial
- Section 2695.7(d) - Failure to accept or deny claim within 40 days of proof of loss
- Section 2695.7(h) - Unreasonable delay in payment after acceptance
Specify the damages you are seeking:
- Policy benefits owed (if unpaid)
- Consequential damages with specifics
- Emotional distress damages
- Punitive damages (state your basis)
- Attorney fees (if applicable under your state's law)
Conclude with a clear demand:
- Specific amount you are demanding (or range)
- Reasonable deadline for response (typically 30 days)
- Statement that you will pursue legal action if not resolved
Sample Demand Letter Framework
Below is a framework showing the structure of an effective bad faith demand letter. This is a template only and should be customized for your specific situation.
[Your Address]
[City, State ZIP]
[Date]
VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
[Insurance Company Name]
[Claims Department Address]
[City, State ZIP]
Re: Demand for Payment - Bad Faith Claim
Insured: [Your Name]
Policy No.: [Policy Number]
Claim No.: [Claim Number]
Date of Loss: [Date]
Dear Claims Manager:
I am writing to demand payment for my insurance claim and to put [Insurance Company] on notice that its handling of my claim constitutes bad faith under [State] law.
BACKGROUND
[Describe the loss/incident, when it occurred, and when you reported it]
[Describe the claim handling chronology - dates of communications, what was said, documents provided, etc.]
BAD FAITH CONDUCT
[Insurance Company]'s conduct constitutes bad faith because:
1. [First specific act of bad faith with dates/details]
2. [Second specific act of bad faith with dates/details]
3. [Additional acts as applicable]
This conduct violates [Insurance Company]'s duty of good faith and fair dealing owed to me as a policyholder. [If California: These actions also violate the California Fair Claims Settlement Practices Regulations, specifically sections 2695.5(e), 2695.7(b), and 2695.7(d).]
DAMAGES
As a result of [Insurance Company]'s bad faith conduct, I have suffered the following damages:
- Policy benefits owed: $[Amount]
- [Consequential damages with specifics]
- Emotional distress: [Description]
DEMAND
I hereby demand that [Insurance Company] pay the sum of $[Total Demand Amount] within thirty (30) days of the date of this letter to fully resolve this matter.
If this matter is not resolved within that time, I will pursue all available legal remedies, including a lawsuit for breach of contract, breach of the implied covenant of good faith and fair dealing, and punitive damages.
Please direct all future communications regarding this matter to me at the address above.
Sincerely,
[Your Signature]
[Your Printed Name]
Enclosures: [List of supporting documents]
This template is for educational purposes only. Every situation is different, and a demand letter should be tailored to your specific facts and your state's law. Consider having an attorney review your letter before sending.
Common Mistakes to Avoid
1. Being Too Emotional or Aggressive
While your frustration is understandable, emotional language weakens your position. Stick to facts and legal arguments. Let the facts speak for themselves.
2. Making Unsupported Claims
Every assertion in your letter should be supported by documentation. Do not claim damages you cannot prove or allege conduct you cannot demonstrate.
3. Demanding an Unrealistic Amount
While you want to leave room for negotiation, an outrageous demand signals that you do not understand your case's value and may not be taken seriously.
4. Missing Key Legal Elements
A demand letter that does not explain why the conduct is "bad faith" under the law is just a complaint letter. Tie the insurer's conduct to specific legal standards.
5. Ignoring Deadlines and Formalities
Some states require specific notice before filing a bad faith lawsuit. Make sure your letter complies with any statutory requirements.
California does not require a pre-suit notice for common law bad faith claims. However, if you plan to seek punitive damages, you must follow the procedures in Civil Code section 3295, which requires court permission to amend your complaint to add a punitive damages claim after filing.
6. Sending to the Wrong Address
Send your demand letter to the correct claims office or legal department. Check your policy for the proper address for legal notices. Always send via certified mail with return receipt requested.
What to Include as Attachments
Supporting Documents Checklist
- Copy of your insurance policy (declarations page and relevant coverage sections)
- Proof of loss documentation you submitted
- The insurer's denial letter or correspondence
- Chronological log of communications with the insurer
- Expert reports or estimates supporting your claim value
- Evidence of consequential damages (financial statements, collection notices)
- Medical records if claiming emotional distress damages
- Photos, videos, or other evidence of the loss
Number and label all attachments as "Exhibit A," "Exhibit B," etc., and reference them by exhibit number in your letter. This makes it easy for the claims handler (and later, a judge) to find the supporting evidence.
After You Send the Letter
Document Everything
Keep your certified mail receipt and return receipt. Create a file with copies of everything you sent.
Track the Deadline
Mark your calendar for the response deadline. If the insurer does not respond, that silence itself may be evidence of continued bad faith.
Be Prepared for Responses
The insurer may:
- Make a settlement offer - Evaluate it carefully against your actual damages
- Request more information - Respond reasonably but do not delay indefinitely
- Deny your claims again - You now have a clear record for litigation
- Ignore you - Document the non-response and prepare to file suit
Consider Your Next Steps
If the insurer does not adequately respond, your options include:
- Filing a complaint with your state's Department of Insurance
- Filing a lawsuit for breach of contract and bad faith
- Consulting with an attorney about representation
Need a Professionally Drafted Demand Letter?
I draft bad faith demand letters that get results. A well-crafted letter can often resolve your dispute without litigation.