When an insurance company drags out your claim, denies it on a thin excuse, or offers a fraction of what it is worth, the frustration is real. But frustration is not the legal question. The legal question is whether the insurer crossed a specific line that gives you a separate claim, worth potentially far more than the policy itself. That line has a name in Nevada: bad faith.
What You Need to Know
A bad faith insurance claim is a lawsuit against an insurance company for breaking its legal duty to treat you fairly, on top of whatever it owes you under the policy. In Nevada, this claim runs almost entirely against your own insurer, the company you have a contract with, such as your uninsured or underinsured motorist (UM/UIM) carrier, your health insurer, or your homeowner’s insurer. It generally does not run against the at-fault party’s insurer, because you have no contract with them. Not every delay or low offer is bad faith. Nevada courts require proof that the insurer had no reasonable basis for what it did and knew it (or recklessly ignored that it had no basis). An honest mistake, a fair dispute over value, or a claim that is still genuinely debatable is not bad faith. When conduct does cross that line, the payoff changes: a bad faith claim opens the door to damages beyond the policy limit, including your consequential financial losses, emotional distress, and punitive damages, which Nevada does not cap in insurer bad faith cases. If your own insurer has denied, stalled, or lowballed you and the explanation does not add up, it is worth having the conduct evaluated before you sign anything or let a deadline pass.
First, Whose Insurance Company Is It?
This is the question that decides whether you have a bad faith claim at all, and most general articles skip it.
Nevada’s bad faith claim grows out of the implied covenant of good faith and fair dealing, a duty the law reads into every insurance contract. Because the duty flows from the contract, it runs to the person the insurer owed the insurance-contract duty to, meaning the insured. That is usually the named policyholder, but it can also include others insured under the policy, and in some cases a person who received a valid assignment of the insured’s rights.
That splits the world into two situations:
- First-party bad faith. You are making a claim on your own policy. After a crash, this is most often a uninsured or underinsured motorist claim, where your own auto insurer stands in for a driver who had no insurance or not enough. It also covers individual health, disability, homeowner’s, and life policies. Here you have a contract, so you have the good-faith protection, and this is where the Nevada bad faith tort actually lives.
One large exception on health and disability: employer-sponsored plans. If your coverage comes through an employer’s benefit plan, it is likely governed by ERISA, a federal law that can preempt state-law bad faith and punitive-damages theories entirely and route the dispute into a federal remedy that looks very different, often limited to the benefit itself. Whether ERISA applies turns on how the plan is set up and funded, not on how the denial letter reads. If your denied claim is on a plan you get through work, that is the first question to answer, because it can change which law governs before anything on this page applies.
- A liability claim against someone else’s insurer. You are the injured person making a claim against the at-fault party’s carrier. You have no contract with that company, and in Nevada that is fatal to a bad faith claim against it. (A note on vocabulary, because it trips up people who read further: in insurance law “third-party bad faith” is a term of art for something else entirely, namely an insurer’s bad faith toward its own insured while defending or settling a claim brought against them, such as refusing a reasonable settlement within limits and exposing the insured to an excess judgment. It does not mean the injured stranger owns a bad faith claim.)
The Nevada Supreme Court drew this line directly in Gunny v. Allstate Insurance Co., 108 Nev. 344, 830 P.2d 1335 (1992). An injured man tried to sue the at-fault party’s insurer for bad faith after it delayed paying him. The court held he “lacks standing to sue because he had no contractual relationship” with the insurer, and separately that he had “no private right of action as a third-party claimant” under Nevada’s unfair-practices statute. The rule is simple: no contract, no bad faith claim.
There are narrow paths around this. A policyholder can sometimes assign their own bad faith rights to the injured person, and a third party who is genuinely mistreated can file a complaint with the Nevada Division of Insurance (a regulatory route, not a personal lawsuit for damages). But if your anger is pointed at the other driver’s insurance company, understand the doctrine before you build a plan on it.
What “Bad Faith” Actually Means
Bad faith is not the same thing as your insurer being wrong, slow, or difficult. It is a distinct legal wrong, separate from simply breaching the policy.
If your insurer refuses to pay something it owes, that is a breach of contract, and the core remedy is the benefit the policy promised. Bad faith is the layer on top: it is the insurer breaking the separate duty of good faith, and it is treated as a tort, which is why it unlocks a different and larger set of damages, including some that a contract claim does not reach. As the Nevada Supreme Court put it in Allstate Insurance Co. v. Miller, 125 Nev. 300, 212 P.3d 318 (2009), “A violation of the covenant gives rise to a bad-faith tort claim,” and the covenant is imposed “by law, not the insurance contract.”
Nevada courts define bad faith as “an actual or implied awareness of the absence of a reasonable basis for denying benefits of the policy” (Miller, quoting American Excess Insurance Co. v. MGM Grand Hotels, Inc., 102 Nev. 601, 729 P.2d 1352 (1986)). The tort has been recognized in Nevada since United States Fidelity & Guaranty Co. v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975). In practical terms, an insured generally has to show two things:
- The insurer acted unreasonably: it denied, delayed, or underpaid a claim without a reasonable basis for doing so; and
- The insurer knew it had no reasonable basis, or recklessly disregarded whether it did.
That second element is what keeps bad faith from being an automatic add-on to every disputed claim. It targets the insurer that knows it should pay and stalls anyway, not the one that made a genuine mistake.
Is a Delay or a Lowball Automatically Bad Faith?
No, and being honest about that is the whole point of understanding this claim.
An insurer is allowed to investigate. It is allowed to ask for documentation, to disagree about what your claim is worth, and to say no when it has a genuine reason. If a claim is fairly debatable, meaning a reasonable insurer could have decided the way yours did, that ordinarily defeats bad faith even if the insurer turns out to be wrong. Worth knowing: an insurer saying a dispute was debatable does not make it so. Whether the position was genuinely and honestly held can itself be a question of fact for a jury rather than an automatic safe harbor the insurer declares. An honest mistake, ordinary negligence, or a real dispute over the value of an injury does not clear the bar.
What tends to move conduct from “hardball” toward bad faith is the insurer acting without a reasonable basis and being aware of it: refusing to investigate at all, ignoring the proof you submitted, inventing a reason after the fact, or sitting on a claim where its own liability is already clear. The line is not “were they unfair to me.” The line is “did they have any reasonable basis, and did they know they did not.”
This distinction matters for a practical reason. The stronger your bad faith case, the more the record has to show the insurer had no reasonable footing. That is why what happens during the claim, including what you say to the adjuster and what the insurer puts in writing, becomes evidence. The clearer the insurer’s lack of a basis, the clearer the claim.
The Specific Acts Nevada Law Calls Out
Nevada does not leave “unfair” to the imagination. NRS 686A.310, part of the state’s Unfair Claims Practices framework, lists specific insurer conduct that counts as an unfair practice. Among the acts it names:
- Misrepresenting policy provisions or the facts at issue in a claim.
- Failing to acknowledge and act reasonably promptly on claim communications.
- Failing to adopt reasonable standards for the prompt investigation of claims.
- Failing to affirm or deny coverage within a reasonable time after proof of loss.
- Failing “to effectuate prompt, fair and equitable settlements of claims in which liability of the insurer has become reasonably clear.”
- Compelling insureds to sue by offering substantially less than what they ultimately recover.
- Failing to give an insured a reasonable explanation for a denial or a low offer.
- Advising an insured not to seek legal counsel, or misleading them about the statute of limitations.
Crucially, the statute also provides its own remedy: “an insurer is liable to its insured for any damages sustained by the insured” as a result of one of these acts (NRS 686A.310(2)). Read that language carefully. The private right to sue under this statute belongs to the insured, which is the same first-party line the Gunny case drew. A third-party claimant cannot use NRS 686A.310 to sue the other side’s insurer, as the court confirmed in Gunny.
These enumerated acts are useful in two ways: they help you recognize whether what happened to you fits a pattern the law already condemns, and they give a claim concrete statutory footing rather than a vague sense of unfairness.
One structural point that matters if you end up in litigation: the statutory unfair-practices claim under NRS 686A.310 and the common-law bad faith tort are separate theories, not two names for the same thing. Proving a statutory violation does not automatically establish the common-law tort’s knowledge element, and the two can carry different proof and different remedies. They are often pleaded together, and a lawyer will decide which fits your facts.
Why Bad Faith Breaks the Policy-Limit Ceiling
This is where a bad faith claim becomes worth understanding, not just venting about.
It is worth being precise here, because the common shorthand, that bad faith is the way past a policy limit, is not quite Nevada law.
Bad faith is one route, and the main one in a first-party benefits dispute. Because it is a tort, damages are measured by the harm the insurer’s misconduct caused, which can run well past the policy’s stated limit. In Nevada, a first-party insured who proves bad faith may recover:
- Consequential financial damages flowing from the insurer’s conduct, which are not automatically capped at the policy limit;
- Emotional distress caused by the mistreatment;
- Punitive damages, where the insurer’s conduct was serious enough to warrant punishment.
Punitive damages are the sharpest tool here, and Nevada treats insurer bad faith as special. Punitive awards in Nevada are normally capped by NRS 42.005 at three times compensatory damages (or $300,000 when compensatory damages are under $100,000). But the statute carves out exceptions, and one of them is squarely on point: the cap does not apply to “an insurer who acts in bad faith regarding its obligations to provide insurance coverage” (NRS 42.005(2)(b)). In other words, when an insurer is found to have acted in bad faith, a punitive award against it is not limited by Nevada’s usual punitive dollar formula. Two qualifiers keep that honest: proving bad faith does not by itself establish entitlement to punitive damages, which requires the separate clear-and-convincing showing of oppression, fraud, or malice; and an award outside the statutory formula is still subject to federal constitutional limits on grossly excessive punishment. (For how punitive damages work generally, see our guide on punitive damages in a Nevada personal injury case; for how policy limits interact with a claim, see how policy limits affect a personal injury claim.)
The second route, which most explainers miss. Nevada does not treat the policy limit as an automatic ceiling on contract damages either. In Century Surety Co. v. Andrew, 134 Nev. Adv. Op. 100 (2018), the Nevada Supreme Court answered a certified question by holding that “an insured may recover any damages consequential to the insurer’s breach of its duty to defend,” so that the insurer’s “liability for the breach of the duty to defend is not capped at the policy limits, even in the absence of bad faith.” The court was explicit that “the right to recover consequential damages … does not require proof of bad faith.”
That case is about the duty to defend, which arises when a liability insurer is defending its insured against someone else’s claim, rather than in a first-party benefits dispute like a UM claim. So it will not apply to every reader of this page. But it matters for two reasons: if you are an insured who was left undefended, you may have a route past the limit without proving bad faith at all; and it shows that the blanket statement “only bad faith gets you past the policy limit” is not accurate in Nevada.
Consider a hypothetical scenario. A driver with $100,000 in UM coverage submits a fully documented UM claim after a serious crash. The insurer, holding proof of clear liability and injuries worth the full limit, offers $15,000 and stops returning calls for months. If a jury finds the insurer had no reasonable basis for that conduct and knew it, the insured’s recovery is not limited to the $100,000 policy; it can include the consequential harm the delay caused and punitive damages beyond the cap. This is a hypothetical example for illustrative purposes only. Actual case outcomes depend on specific facts, evidence, and circumstances.
If You Think You’re Being Treated in Bad Faith
Recognizing bad faith is one thing. Protecting the claim is another, and a few things matter early.
If you do only one thing, do not sign a release or cash a “final” settlement check before you understand what it gives up. A release can quietly waive claims you have not valued yet, including the extra-contractual bad faith claim itself.
Beyond that, the record is everything. Keep the policy and any denial letters, save written explanations (and put your own questions in writing), and log dates and names. Because bad faith turns on whether the insurer had a reasonable basis, the paper trail the insurer creates is often the case. The specific pressure tactics insurers use, and how to counter them, are covered in depth in our companion guide on delay, deny, and defend; if the fight is over a denied auto claim, see what to do if the insurance company denies your car accident claim, and before giving any recorded statement, review your rights regarding insurance recorded statements.
One more piece of sequencing to keep in mind: a bad faith claim usually rides on top of the underlying claim, and whether the insurer owed the benefit often has to be resolved before the bad faith piece can be judged. That does not mean the claims are always filed in sequence. Contract, statutory, and tort theories can sometimes be pleaded together and then stayed or bifurcated by the court, so do not delay filing on a blanket “resolve it first” rule. It also does not mean waiting quietly. The underlying claim runs on its own deadline, and in Nevada a personal injury claim generally must be filed within two years of the injury under NRS 11.190(4)(e). Letting that clock run can cost you the leverage the bad faith claim depends on.
Frequently Asked Questions
Can I Sue the Other Driver’s Insurance Company for Bad Faith in Nevada?
Generally, no. Nevada limits the bad faith claim to your own insurer, because the duty of good faith comes from your insurance contract and you have no contract with the at-fault driver’s carrier. In Gunny v. Allstate Insurance Co., 108 Nev. 344, 830 P.2d 1335 (1992), the Nevada Supreme Court held that a third-party claimant “lacks standing” and has “no private right of action” against the other side’s insurer. The narrow exceptions are an assignment of the policyholder’s rights or a regulatory complaint to the Nevada Division of Insurance. If the other driver’s insurer is stonewalling you, the answer is usually a different strategy, not a third-party bad faith suit.
Is Bad Faith the Same as Breach of Contract?
No. If your insurer simply fails to pay what the policy owes, that is a breach of contract, and your recovery is essentially the benefit plus interest. Bad faith is a separate tort: the insurer broke the legal duty to treat you fairly. That distinction is why bad faith can produce damages beyond the policy, including emotional distress and punitive damages outside the usual statutory formula. It is not the only route past a limit, though: under Century Surety, an insurer that breaches its duty to defend can owe consequential damages beyond the limit without any showing of bad faith.
How Long Do I Have to Bring a Bad Faith Claim?
Deadlines here are fact-specific, and there is more than one clock running at once. Nevada’s limitation periods are set by category in NRS 11.190: an action on a written contract, which is what your insurance policy is, generally falls in the six-year bucket; an obligation not founded on a written instrument falls in the four-year bucket, which is where a common-law bad faith tort generally sits; and a liability created by statute falls in the three-year bucket, which is where an NRS 686A.310 theory generally sits.
So the intuition that the tort claim always gives you the most room is backwards. And separately, if your bad faith dispute sits on top of an underlying injury claim against a third party, that tort claim often runs on two years (NRS 11.190(4)(e)) and is usually the most urgent one. Accrual, which is the question of when each clock actually starts, varies by theory and can turn on when the insurer formally denied the claim. Because more than one deadline can apply to the same set of facts, confirm them early rather than assuming the longest one covers you.
Do I Have to Resolve My Underlying Claim First?
Often, but not as a rule you should act on alone. A bad faith claim ordinarily flows from how the insurer handled the underlying coverage or value dispute, so entitlement to the benefit usually has to be established before the bad faith piece is fully ripe. But the theories can sometimes be pleaded together and then stayed or bifurcated, and each carries its own deadline, so “resolve the first one and then think about it” is not a safe default. Preserve evidence of the insurer’s conduct as it happens rather than after the fact, and get the sequencing advice early.
Will Hiring a Lawyer Hurt My Open Claim?
It does not remove the insurer’s obligations. You are entitled to be represented, and the insurer’s duty of good faith does not switch off because you retain counsel. It does change the practical shape of the claim, since communications will typically route through your lawyer and the timing and strategy shift accordingly. In many cases, involving a lawyer is what forces the insurer to state its reasons in writing, which is exactly the record a bad faith claim depends on. Continue meeting your genuine policy obligations, such as reasonable requests for documentation, while getting advice on requests that seem overbroad.
If You Were Injured in Las Vegas
With over 40 years as a personal injury attorney, Jack Bernstein understands how insurers evaluate, delay, and deny first-party claims, and where the line between hard bargaining and bad faith actually falls under Nevada law. If your own insurance company has denied, stalled, or lowballed a claim and the explanation does not match what you know, Jack Bernstein Injury Lawyers offers a free consultation to evaluate the insurer’s conduct, whether it crosses into bad faith, and the compensation that may be available beyond your policy limits. There is no attorney fee unless we win. Call (702) 633-3333.
