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Insurance Bad Faith in Wisconsin: What to Do When Your Insurance Company Treats You Unfairly
What Is Insurance Bad Faith?
Insurance bad faith occurs when an insurance company treats its own policyholder unfairly. As Paul Benson explains, this only applies to your own insurer, not the other party’s company.
When you buy a policy, your insurer takes on a duty of good faith and fair dealing — meaning they must treat your interests the same as their own. If they instead act to protect their financial interests at your expense, they’ve crossed the line into bad faith.
In simple terms, it’s when an insurance company puts profit over its policyholder.
How Insurance Companies Are Expected to Treat Policyholders
Under Wisconsin law, insurance companies must act as partners, not opponents, to the people they insure.
They have a duty to:
- Communicate clearly and promptly about claims.
- Explain timelines, coverage options, and exclusions.
- Offer fair claim evaluations.
- Avoid lowballing or denying claims without a legitimate reason.
Benson emphasizes that insurers can only deny a claim if there’s a good faith, rational basis for doing so. If there’s no reasonable justification, that denial can open the door to a bad faith lawsuit.
Common Red Flags of Bad Faith Insurance Practices
Paul Benson says there are clear warning signs that your insurer may not be acting in good faith:
- Unreasonable delays — going weeks without updates or responses.
- Denials without explanation — rejecting a claim with no reason provided.
- Failure to disclose policy terms — such as time limits, exclusions, or riders you later discover yourself.
- Lack of urgency — especially in emergencies like floods or storm damage.
He warns that even short delays can qualify as unreasonable when immediate action is needed.
How Often Do Bad Faith Cases Occur?
Benson notes that while insurance bad faith happens more often than people think, these cases can be difficult to prove.
Wisconsin courts typically require strong preliminary evidence before granting access to the insurer’s internal claim file — the very documents that often reveal the bad faith conduct. This “catch-22” makes the process challenging, since much of the proof lies within that restricted information.
Despite that, Benson sees bad faith behavior frequently in hail, storm, and underinsured motorist claims, where insurers deny or undervalue legitimate cases to save money.
Real Example of an Insurance Bad Faith Case
Benson recalls representing a client injured in a car accident who required spinal fusion surgery.
The at-fault driver’s insurer paid its $100,000 policy limit, but the client’s own insurance company denied further coverage, claiming the surgery wasn’t necessary — without any medical expert review.
Once Benson’s team obtained the insurer’s claim file through litigation, they discovered the adjuster had no reasonable basis for the denial. The insurer ultimately paid the full value of the claim plus an additional settlement amount — essentially serving as punitive damages for the bad faith conduct.
“It was a clear example of an insurer putting its financial interests ahead of its policyholder,” Benson says.
Why Bad Faith Is a Serious Allegation
Alleging bad faith against an insurer is no small matter. It not only exposes the company to potential financial penalties, but also to public scrutiny.
Benson explains that insurance companies fear these claims because juries often side with policyholders — especially in today’s climate, where public trust in insurance companies is low. When proven, a bad faith verdict can severely damage an insurer’s reputation and bottom line.
How to File a Bad Faith Claim
Filing a bad faith claim is a complex legal process that almost always requires an attorney.
In Wisconsin, these claims are usually paired with another lawsuit — such as a breach of contract claim for failing to pay the underlying insurance benefits. The lawsuit then proceeds in two stages:
- The breach of contract case is resolved first.
- The bad faith case follows afterward.
Benson notes that this system often drains policyholders’ energy and resources, which insurers count on. After settling the first case, many people lack the time or funds to pursue the second.
However, in especially severe cases, judges may allow both claims to proceed simultaneously — particularly when the insurer’s conduct is clearly egregious.
Why Insurers Fear Bad Faith Claims
When a bad faith claim is added to a lawsuit, insurers are forced to hire separate legal counsel to defend that part of the case. That extra cost and complexity often motivate them to settle the primary claim faster and for higher value.
Benson says, “Just the threat of a bad faith claim can sometimes help level the playing field.”
What Consequences Do Insurers Face for Bad Faith?
If found guilty of bad faith, an insurance company can face serious financial consequences.
Juries may award additional damages to punish the company’s misconduct. In some cases, the Wisconsin Department of Insurance can also step in and impose civil penalties.
Still, Benson says, “The most effective way to hold insurers accountable is through a jury verdict that hits their bottom line.”
Why It’s Important to Get a Lawyer Involved Early
Benson strongly advises hiring an attorney as soon as you suspect bad faith. A lawyer can send a litigation hold letter, requiring the insurer to preserve all claim files, emails, and internal communications.
Without that early action, key evidence can easily be lost or deleted, weakening your case later.
How Long You Have to File a Bad Faith Claim in Wisconsin
Wisconsin has strict timelines for these claims:
- Personal injury: 3 years
- Breach of contract: 6 years
- Insurance bad faith: 2 years
That two-year window makes bad faith claims time-sensitive. While it’s enough time to prepare properly, Benson warns against waiting until the last minute. Filing early gives your attorney time to research and build a stronger case.
Final Thoughts
Paul Benson encourages anyone who suspects their insurance company of delaying, denying, or lowballing a legitimate claim to take action — and not to handle it alone.
Early documentation, clear communication, and legal guidance make all the difference in protecting your rights and holding insurers accountable.
Learn more about Paul Benson and how he helps Wisconsin residents fight unfair insurance practices at
paulbensonlawfirm.com.
