Understanding Bad Faith Insurance Claims with a Nebraska Lawyer

What Exactly is a Bad Faith Insurance Claim in Nebraska?

In Nebraska, the relationship between an insurance company and its policyholder is not merely a contractual one; it is also a fiduciary relationship built on trust and the implied duty of good faith and fair dealing. This legal principle means the insurer must place the interests of its policyholder on at least equal footing with its own. A bad faith insurance claim arises when the company breaches this duty, prioritizing its profits over the well-being of the person it is obligated to protect.

Bad faith can manifest in two primary ways:

First-Party Bad Faith: This occurs when an insurance company unjustly denies, delays, or undervalues a claim made by its own policyholder. Examples include a health insurer refusing a necessary medical procedure, a homeowner’s insurer lowballing a fire damage estimate, or a disability insurer ceasing payments without justification.
Third-Party Bad Faith: This typically happens in liability insurance contexts (like auto or business liability). It occurs when an insurer fails to properly defend its policyholder against a lawsuit or refuses to settle a claim within policy limits when it is reasonable to do so, exposing the policyholder to a larger personal judgment.

Nebraska law recognizes these actions as more than just a breach of contract; they are a tort, meaning the policyholder can seek compensation for the full extent of their damages, which often extends far beyond the original policy benefits.

Nebraska Laws Governing Insurance Bad Faith

Nebraska does not have a specific statute solely dedicated to bad faith insurance claims. Instead, the cause of action is built upon a foundation of common law (court-made precedent) and reinforced by state statutes designed to regulate the industry and protect consumers.

The cornerstone is the Nebraska Supreme Court’s adoption of the tort of bad faith in the case of Braesch v. Union Ins. Co. (1982). The court held that an insurer owes a duty of good faith to its insured and can be held liable in tort for its breach. This was a significant shift, as it opened the door for policyholders to recover consequential damages, emotional distress, and, in egregious cases, punitive damages.

Furthermore, the Nebraska Unfair Insurance Claims Practices Act (Neb. Rev. Stat. § 44-1536 to 44-1544) provides a regulatory framework. This law enumerates specific practices that are deemed unfair claim settlement practices, such as:

Misrepresenting pertinent facts or policy provisions.
Failing to acknowledge and act promptly upon communications.
Failing to adopt and implement reasonable standards for prompt investigation.
Not attempting in good faith to effectuate prompt, fair, and equitable settlements.
Compelling policyholders to initiate litigation by offering substantially less than what is ultimately recovered.

While a private right of action under this statute is limited, a Nebraska bad faith lawyer can use evidence of these violations to powerfully demonstrate the insurer’s breach of its common law duty of good faith.

Common Tactics and Red Flags of Insurance Bad Faith

Insurance companies are sophisticated entities with vast resources. Their tactics are rarely overt; they are often designed to wear down the policyholder into accepting less or abandoning the claim altogether. Recognizing these red flags is the first step toward protecting your rights.

Unjustified Delay: Consistently dragging out the process with repeated requests for the same information, unnecessary paperwork, or extended “investigation” periods with no communication.
Inadequate Investigation: Denying a claim without conducting a thorough, objective investigation. This includes relying on biased or unqualified adjusters or “independent” experts who are consistently hired by the insurer.
Lowball Offers: Making a settlement offer that is far below the reasonable value of the claim, often accompanied by pressure to sign a quick release without seeking independent counsel.
Policy Misinterpretation: Denying a claim based on a strained, unreasonable, or outright incorrect interpretation of the policy language.
Failure to Communicate: Ignoring phone calls, emails, or letters from the policyholder or their attorney for unreasonable periods.
Denial Without Explanation: Issuing a denial letter that is vague, cites inapplicable policy exclusions, or fails to provide a clear and specific reason for the denial.
Changing Rationale: Providing different, shifting reasons for a delay or denial over time, indicating a post-claim effort to find a justification for non-payment.

The Damages You Can Recover in a Nebraska Bad Faith Case

Successfully proving a bad faith claim in Nebraska allows a policyholder to seek compensation that goes far beyond the original insurance policy limits. The goal is to make the injured party “whole” for all losses caused by the insurer’s misconduct.

Contract Damages: The full amount of the insurance policy benefits that were wrongfully withheld.
Consequential Damages: All foreseeable financial losses that resulted from the denial. For example, if a business’s property claim was denied, leading to bankruptcy, the business losses could be recovered. If a health claim was denied, leading to worsened medical conditions, the additional medical costs could be recovered.
Emotional Distress Damages: Compensation for the mental anguish, anxiety, stress, and sleepless nights caused by the insurer’s actions. Nebraska courts recognize that fighting an insurance company over a vital claim is an intensely stressful experience.
Attorney’s Fees and Litigation Costs: If you are forced to hire a lawyer to obtain the benefits you are owed, the insurer can be ordered to pay your reasonable attorney’s fees and court costs.
Punitive Damages: In cases where the insurer’s conduct is found to be especially egregious, willful, wanton, or malicious, the court may award punitive damages. These are not meant to compensate the victim but to punish the wrongdoer and deter similar conduct in the future.

The Critical Role of a Nebraska Bad Faith Insurance Lawyer

Navigating a bad faith insurance claim is a complex legal battle against a powerful adversary. An experienced Nebraska lawyer specializing in this area is not just an advocate; they are a strategist and an essential guide through a treacherous process.

Case Evaluation and Investigation: A lawyer will conduct a thorough review of your policy, the denial letters, and all correspondence with the insurer to identify clear evidence of bad faith tactics.
Building a Powerful Record: Your attorney will methodically build a case file that highlights the insurer’s unreasonable conduct. This involves meticulously documenting all interactions, securing independent expert opinions to counter the insurer’s lowball assessments, and creating a timeline that demonstrates delay and obfuscation.
Navigating Complex Legal Procedures: Bad faith cases involve intricate rules of evidence and civil procedure. Your lawyer will handle all filings, motions, and discovery requests, ensuring your case is presented effectively and efficiently.
Negotiating from a Position of Strength: Insurers often take unrepresented claimants less seriously. The presence of a skilled litigator signals that you are prepared to go to court, which frequently leads to more serious settlement negotiations and better offers.
Aggressive Litigation: If a fair settlement cannot be reached, your lawyer must be fully prepared to take the case to a jury. Trial experience is critical to maximizing your potential recovery, especially for punitive damages.

The Litigation Process: What to Expect in a Nebraska Court

Filing a bad faith lawsuit is a significant undertaking. Understanding the process can help demystify what lies ahead.

Filing the Complaint: Your lawyer will draft and file a formal complaint outlining the facts of your claim, the terms of your policy, the insurer’s actions, and the legal basis for alleging bad faith.
The Answer and Discovery: The insurer will file an answer denying the allegations. The case then enters the discovery phase, where both sides exchange information through interrogatories (written questions), requests for production of documents (e.g., the insurer’s internal claim file), and depositions (sworn, out-of-court testimony).
Expert Testimony: Both sides will typically retain experts. Your attorney may hire a claims handling expert to testify that the insurer’s actions fell below the industry standard of care. The insurer will hire its own experts to defend its conduct.
Motions for Summary Judgment: The insurer will often file a motion asking the judge to dismiss the case before trial, arguing that there is no genuine dispute of material fact. Your lawyer must file a powerful opposition, demonstrating the clear evidence of bad faith that warrants a jury trial.
Trial: If the case is not dismissed or settled, it will proceed to a trial before a judge and jury. Your attorney will present evidence, call witnesses, and argue to the jury why the insurer acted in bad faith and why you deserve full compensation.

How to Protect Yourself and Build a Strong Case

Your actions immediately following a claim denial can significantly impact a subsequent bad faith case.

Read Your Policy Thoroughly: Understand your coverage, exclusions, and the steps you are required to take after a loss.
Document Everything: Keep a detailed log of every interaction with the insurance company: dates, times, names of representatives, and summaries of conversations. Follow up phone calls with emails summarizing what was discussed.
Get Everything in Writing: Politely insist that the insurer communicates important decisions—especially denials, delays, or requests for information—in writing. This creates a clear paper trail.
Preserve Evidence: Take photos and videos of damage. Keep damaged property until the claim is resolved. Maintain records of all expenses related to the loss.
Do Not Accept the First Low Offer: Politely reject any offer that seems unreasonably low and state your reasons in writing. Do not sign a release or cash a check that is labeled “full and final payment” unless you are certain it is fair.
Consult a Nebraska Bad Faith Lawyer Early: Do not wait until you are at the end of your rope. An attorney can often intervene early, sending a strong demand letter that can resolve the matter without litigation. Early consultation ensures your rights are protected from the outset.