What Is the Difference Between an Undervalued Insurance Claim and Bad Faith?

When an insurance company offers less than you believe your claim is worth, it can be difficult to know whether you are dealing with an ordinary valuation dispute or something more serious. A low settlement offer, denied claim, delayed payment, or disagreement over the value of damage does not automatically mean the insurer acted in bad faith.

In Florida, an undervalued insurance claim and an insurance bad-faith claim involve different legal issues. An undervalued claim generally concerns how much the insurer should pay, while a potential bad-faith claim focuses more closely on how the insurer investigated, evaluated, communicated about, and handled the claim.

Florida’s bad-faith laws have also changed in recent years, including changes addressing negligence, insurer conduct, claimant conduct, and additional requirements for certain property-insurance bad-faith claims. Understanding these distinctions can help policyholders determine what steps may be appropriate when an insurance claim is denied, delayed, or underpaid.

For broader guidance on underpaid and disputed property claims, visit The Morgan Law Group’s Property Damage Resource Center and our guide on how to respond to an underpaid insurance claim.

This article provides general information and is not legal advice. Insurance laws and claim requirements can change, and the law applicable to a particular claim depends on the facts, policy language, date of loss, and other circumstances.

For example, a homeowner may submit a claim for significant roof and interior damage after a storm, while the insurer determines that only part of the damage is covered or issues an estimate that is substantially below the anticipated repair cost.

A disagreement over value does not, by itself, establish bad faith. The dispute may instead involve questions about scope, causation, repair costs, depreciation, exclusions, deductibles, or whether particular repairs are necessary and reasonable.

If your insurer has accepted coverage but the payment appears too low, review our guide on how to respond to an underpaid insurance claim and our article on why insurance estimates may be lower than contractor estimates.

Florida Statutes §624.155 provides a civil remedy for certain insurer conduct, including failing to attempt in good faith to settle claims when, under the circumstances, the insurer could and should have done so while acting fairly and honestly and with due regard for the insured’s interests.

The key distinction is that bad faith focuses on how the insurer handled the claim, while an undervalued claim generally focuses on how much the insurer believes it owes.

For more information about disputed or delayed claim handling, review our guide on insurance claim delays and bad faith.

For example, if an insurer offers $20,000 on a claim the policyholder believes is worth $50,000, the difference alone does not establish bad faith. The next questions include how the insurer calculated its estimate, what evidence it considered, whether the loss was adequately investigated, whether the decision was explained, and how the insurer responded to information challenging its position.

That distinction is important because an underpaid claim, a breach-of-contract dispute, and a potential bad-faith claim are related concepts, but they are not interchangeable.

If the dispute centers primarily on the amount paid, review our guide on what to do when an insurance settlement is too low.

Florida law expressly provides that mere negligence alone is insufficient to constitute bad faith. The law also recognizes that the insured, claimant, and their representatives have duties to act in good faith when providing claim information, making demands, setting deadlines, and attempting to settle a claim.

For example, if an insurer offers $20,000 and the policyholder believes the claim is worth $50,000, the difference alone does not establish bad faith. It may instead be necessary to examine how the estimate was calculated, what evidence was considered, whether the insurer adequately investigated the loss, and how it responded to information challenging its position.

If your main concern is that the insurer paid too little for covered damage, review our guide on how to respond to an underpaid insurance claim.

Recent reforms reinforce several important distinctions:

• Negligence alone is not enough: Florida law expressly provides that mere negligence is insufficient to establish bad faith.
• A mistake does not automatically create a bad-faith claim: An insurer may make an error or reach a disputed conclusion without that conduct alone satisfying the legal standard for bad faith.
• Claimant conduct can also matter: Florida law addresses how the insured, claimant, and their representatives provide information, make demands, set deadlines, and participate in settlement efforts.
• The full claim history should be reviewed: The insurer’s investigation, communications, explanations, and response to supporting evidence may all be relevant.
• Property-insurance claims have additional requirements: Florida property-insurance bad-faith claims are subject to statutory requirements that differ from an ordinary valuation or coverage dispute.

The key point is that an insurance dispute should not automatically be characterized as bad faith simply because the insurer made an error or the parties disagree about the amount owed.

Instead, the underlying coverage dispute and the insurer’s conduct should be evaluated separately.

For related guidance, review our article on insurance claim delays and bad faith and The Morgan Law Group’s Property Damage Resource Center.

The distinction matters because a rule that applies to a liability claim arising from an auto accident may not apply in the same way to a homeowner’s dispute with a property insurer.

For broader guidance on injury-related liability claims, visit The Morgan Law Group’s Personal Injury Resource Center.

This means a property owner should distinguish between a breach-of-contract dispute over what the policy requires the insurer to pay and a later potential claim for extracontractual bad-faith damages.

An underpaid estimate, disputed appraisal result, or disagreement over covered damage may be important to the underlying insurance dispute, but those issues do not automatically satisfy the additional statutory requirements for a property-insurance bad-faith claim.

For more information about disputed property claims, review our guides on underpaid insurance claims and insurance settlements that appear too low.

A policyholder may have grounds to challenge a denial without necessarily having a bad-faith claim. The first issue may simply be whether the insurer correctly interpreted the policy, evaluated the cause of loss, or considered the available evidence.

If your claim was denied, review our guide on why insurance claims are denied and our article on what to do when an insurance claim is denied after an inspection.

The key question is not simply whether the claim took a long time. The circumstances surrounding the delay matter, including what information was outstanding, whether further investigation was reasonably necessary, and how the insurer communicated throughout the process.

Policyholders should preserve emails, letters, requests for information, inspection notices, claim-status updates, and other communications that show how the claim progressed over time.

If your claim has been taking longer than expected, review our guide on what to do when an insurance claim is taking too long and our article on insurance claim delays and bad faith.

• Insurance policy: Keep a complete copy of the policy, including declarations, endorsements, exclusions, and applicable forms.
• Photographs and videos: Before-and-after images can help document the condition of the property and the extent of the damage.
• Repair estimates: Independent contractor estimates can help show the anticipated cost of repairing covered damage.
• Invoices and receipts: Actual repair invoices, receipts, and other cost documentation can help support the amount being claimed.
• Engineering or expert reports: Depending on the claim, reports from engineers, roofing professionals, contractors, or other qualified experts may help explain the cause and extent of damage.
• Communications with the insurer: Preserve emails, letters, claim correspondence, estimates, and other communications concerning the claim.
• The insurer’s estimate: Request and retain the insurer’s estimate and any explanation provided for how the claim was valued.

Comparing the insurer’s estimate with independent estimates, invoices, photographs, and expert findings can help identify the specific areas where the parties disagree.

For additional guidance on documenting a disputed property claim, review our guide on why insurance estimates may be lower than contractor estimates and The Morgan Law Group’s Property Damage Resource Center.

Rather than simply stating that the payment is too low, it is usually more useful to identify the specific areas where the insurer’s valuation differs from the documented damage and repair costs.

For related guidance, review our articles on how to respond to an underpaid insurance claim and what to do when an insurance settlement is too low.

For Florida property-insurance claims, Florida Statutes §624.1551 establishes additional requirements before certain extracontractual bad-faith damages can be pursued.

Under the statute, an insured generally must first establish through an adverse adjudication that the property insurer breached the insurance contract and obtain a final judgment or decree before an action for extracontractual damages under §624.155(1)(b) can proceed.

This means a policyholder should not assume that an unfavorable appraisal result, disputed estimate, or underpayment automatically creates a bad-faith claim.

Instead, the underlying coverage or contract dispute and the insurer’s claim-handling conduct should be evaluated separately.

If your insurer has accepted coverage but paid less than the documented cost of repairs, review our guide on how to respond to an underpaid insurance claim. If the dispute involves the insurer’s handling of the claim, review our article on insurance claim delays and bad faith.

A civil remedy notice is intended to identify the alleged statutory violation and give the insurer notice of the conduct being challenged before a bad-faith action proceeds.

• The alleged statutory violation: The notice should identify the provision or conduct the claimant believes was violated.
• The supporting facts and circumstances: The notice should explain the facts supporting the alleged violation.
• The individuals involved: The notice may identify people involved in the alleged claim-handling conduct.
• Relevant policy language: When applicable, the notice should identify policy language relevant to the alleged violation.
• The purpose of the notice: The notice should explain the nature of the complaint and the conduct the claimant believes should be corrected.

The statute provides a 60-day period after the notice is filed during which the insurer may pay the damages or correct the circumstances giving rise to the alleged violation.

Because the civil remedy notice has specific statutory requirements, policyholders considering this step should understand the applicable law and the consequences of the notice before filing.

For broader guidance on disputed claims, visit The Morgan Law Group’s Property Damage Resource Center.

A breach-of-contract dispute may therefore come first. The policyholder may need to establish that the insurer failed to provide benefits required under the insurance contract before a separate bad-faith issue can proceed under the applicable Florida property-insurance statutes.

This distinction is especially important when a claim is denied or underpaid. A policyholder may have a valid dispute over coverage or payment without necessarily having a bad-faith claim.

For related guidance, review our articles on why insurance claims are denied, underpaid insurance claims, and insurance settlements that appear too low.

An attorney can review the insurance policy, claim history, estimates, correspondence, supporting evidence, and the insurer’s stated position to help distinguish between a valuation dispute, a breach-of-contract claim, and a potential bad-faith issue.

Legal guidance may also be helpful if you submitted additional documentation but the insurer did not adequately address it, or if you are unsure about your rights and obligations under the policy.

For broader guidance on disputed property claims, visit The Morgan Law Group’s Property Damage Resource Center.

A low payment or denied claim may begin as a disagreement over coverage, the scope of damage, repair costs, exclusions, or the amount owed under the policy. Bad faith focuses more specifically on how the insurer investigated, evaluated, communicated about, and attempted to resolve the claim.

For Florida property-insurance disputes, additional statutory requirements may apply before certain bad-faith remedies can be pursued. That makes it important to understand exactly what type of dispute you are dealing with before deciding what steps to take next.

If you believe your property insurance claim was denied, delayed, or substantially underpaid, The Morgan Law Group can review the policy, supporting evidence, claim history, and insurer communications to help you understand your available options.

This article is provided for general informational purposes and is not legal advice. Insurance disputes are fact-specific, and applicable laws and policy terms may affect your rights and options.