What counts as insurance bad faith in Nevada? Five behaviors that turn a denied claim into a legal case

July 29, 2026

You purchase insurance with the expectation that if something goes wrong, your insurer will fairly evaluate your claim and provide the coverage you paid for. But when insurers put profits ahead of policyholders, what begins as a denied claim can become something much more.

Not every denied insurance claim is an example of bad faith. Insurance companies have the right to investigate claims, and they can deny a claim when the facts and the policy limit establish there is no coverage.

The line between a legitimate coverage dispute and insurance bad faith often comes down to how the insurer handled the claim. An insurer acts in bad faith when it knowingly denies a claim without a reasonable basis. Whether a reasonable basis exists often depends on whether you were fairly throughout the claims process.

When a claim for insurance benefits is presented, Nevada law requires insurance companies to treat their policyholders or insureds fairly and in good faith. This obligation is known as the duty of good faith and fair dealing. When an insurer violates that duty, the policyholder may have a claim for insurance bad faith. Here are five common behaviors that can constitute insurance bad faith.

1. Unreasonably Denying a Covered Claim 

When an insurance company receives a claim that is covered under the policy, it must promptly accept and fairly pay the claim. The failure to do so can be insurance bad faith.

2. Failing to Conduct a Fair Investigation 

An insurance company cannot fairly decide whether to approve or deny a claim without first conducting a reasonable investigation.

A reasonable investigation means an insurer must look for coverage by reviewing the available evidence, considering the facts, and evaluating the claim on its own merits. If an insurer ignores important records, overlooks evidence that supports coverage, or rushes to deny a claim before gathering the necessary information, it may not be fulfilling its legal obligations.

Insurance companies are expected to evaluate claims objectively. They cannot decide on an outcome first and then look for reasons to justify it afterward. An insurance company that denies a legitimate claim without first conducting a reasonable investigation acts in bad faith.

3. Unreasonably Delaying a Claim 

An insurance company cannot delay paying a legitimate claim. Some legitimate insurance claims are more complicated and may take more time to investigate. This may be the case when homes burn down, and it takes time to figure out much it will cost to rebuild. Other claims may involve serious injuries or complex questions of coverage. But unnecessary delays are another matter.

Policyholders have the right to expect the insurance company will communicate with them about the claim. Policyholders should not have to wait weeks or months without meaningful communication, repeatedly respond to the same information requests, or wait indefinitely for a coverage decision.

Whether it’s repairing a damaged home, reopening a business, or paying mounting medical bills, delays can create financial hardship long before a claim is ever resolved.

Nevada law requires insurers to handle claims promptly and communicate with policyholders throughout the process.

4. Misrepresenting Coverage or the Reason for a Denial 

Insurance companies should always be truthful to their policyholders. Insurance companies are experts in reading and interpreting their own policies. These policies are complex, lengthy, and difficult to understand. The insurance company’s job is to help you navigate the claim, but insurers cannot use that complexity to their advantage.

Under Nevada law, insurers must provide a reasonable explanation for their decision to deny a claim. If an insurer misstates what the policy covers, relies on provisions that do not apply, or fails to adequately explain the basis for its decision, those actions may raise questions about whether the claim was handled fairly.

Coverage disputes may exist, but the insurance company has to duty to fairly interpret the insurance contract. Policyholders should never be left guessing why benefits were denied.

5. Underpaying a Claim Without a Reasonable Basis 

Insurance bad faith can occur when an insurance company lowballs a claim. Insurers must fairly evaluate and pay covered claims. An insurer cannot offer to pay less than a covered claim is worth without a reasonable basis.

Insurance companies are required to evaluate claims based on a fair assessment of the facts, the terms of the policy, and the available evidence. They cannot arbitrarily undervalue a covered claim simply to reduce what they pay.

When an insurer offers substantially less than a claim is worth without justification or places profits ahead of a fair evaluation, the dispute may extend beyond a simple disagreement over value.

What Should You Do If You Suspect Insurance Bad Faith? 

If you believe your insurance company handled your claim unfairly, taking a few practical steps can help protect your rights:

• Request a written explanation for any denial or reduction in payment.
• Keep copies of your insurance policy, claim documents, emails, letters, and notes from conversations with the insurer.
• Save photographs, repair estimates, medical records, receipts, and any other evidence supporting your claim.
• Document how delays or a wrongful denial has affected you financially.
• Speak with an attorney before accepting an unfair denial or settlement offer.

A strong paper trail can make a significant difference if questions later arise about how your claim was handled.

Holding Insurance Companies Accountable in Nevada 

Insurance companies have every right to investigate claims and determine whether coverage exists. What they cannot do is place their own financial interests ahead of their obligation to treat policyholders fairly.

For more than 30 years, the Law Office of Matthew L. Sharp has represented individuals and businesses in insurance disputes throughout Nevada. The firm has recovered millions of dollars for clients whose insurers failed to honor their contractual and legal obligations.

If you believe your insurance company acted in bad faith, contact the Law Office of Matthew L. Sharp to discuss your situation and learn about your legal options.