This weekend marked the beginning of football season for many colleges and universities. When it comes to college football, I am a loyal fan to my alma mater, University of Notre Dame (located in South Bend, Indiana) which won its home opener on Saturday against Rice. On a related note to Indiana, my blog this week will focus on Indiana first party bad faith insurance law. You may recall I previously wrote about the statute of limitations for a property insurance claim in Indiana.

In Indiana, the statute of limitations for a first-party insurance claim is ten (10) years for a breach of contract claim. However, for a first-party bad faith claim, the statute of limitations is generally two (2) years.1

In Indiana, there is a legal duty for insurance carriers to deal in good faith, which is implied into insurance contracts as a matter of law.2 The tort of breach of good faith occurs when an insurer denies liability knowing there is no “rational, principled basis for doing so.”3 To establish bad faith, the policyholder must establish “dishonest purpose, moral obliquity, furtive design or ill will.”4

Indiana has a statute which regulates certain unfair claim settlement practices: Ind. Code § 27-4-1-4.5. One example is when an insurer fails to acknowledge and act reasonably promptly upon communications with respect to claims arising under policies.5

There are also certain practices committed by an insurer regarding claims, if performed with such frequency as to indicate a general business practice, which are defined as unfair and deceptive practices and are prohibited. These include:

  • Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under policies.6
  • Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements under the policy have been completed and submitted by the insured.7
  • Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear.8

Under Indiana law, punitive damages for a breach of an insurer’s duty to deal with the insured in good faith may be awarded only if there is clear and convincing evidence that the insurer acted with malice, fraud, gross negligence or oppressiveness which was not the result of mistake of fact or law, honest error of judgment, overzealousness, mere negligence, or other human failing.9

For any other Irish fans out there, I leave you with the Notre Dame Victory March!


1 See Trzeciak v. State Farm Fire & Cas. Co., 809 F. Supp. 2d 900, 913 (N.D. Ind. 2011) (“When courts recognize the breach of the duty of good faith as a pure tort, they apply the two-year statute of limitations in Indiana Code § 34–11–2–4(2), that provides: “[a]n action for … injury to personal property … must be commenced within two (2) years after the cause of action accrues.” citing Domsic v. Allstate Ins. Co., No. 2:09–cv–208, 2010 WL 3326708, at *4 (N.D.Ind. Aug. 19, 2010)).
2 Erie Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993).
3 Hickman, at 520.
4 Patel v. United Fire & Cas. Co., 80 F.Supp.2d 948 (N.D. Ind. 2000).
5 See Ind. Code § 27-4-1-4.5(2).
6 See Ind. Code § 27-4-1-4.5(3).
7 See Ind. Code § 27-4-1-4.5(5).
8 See Ind. Code § 27-4-1-4.5(6).
9 McLaughlin v. State Farm Mut. Auto. Ins. Co., 30 F.3d 861 (7th Cir. 1994).