Bad Faith by Delay: What About Timelines and the Duty to Move the Money?

Claim delay causing a tardy payment is not good faith claims handling. Insurance companies must immediately investigate coverage and evaluate damages after learning of a loss. Then, insurers should pay the covered losses as soon as they can. A Mississippi case I referenced regarding extra expense coverage in Fine Print, Grammar, and the Cost of Getting Back to Business: A Lesson from the State Farm Extra Expense Case, also discussed Mississippi bad faith law in the context of claims delay.

Mississippi law has long recognized that an insurer doesn’t just owe claims accuracy. It also owes claims urgency. That’s the quiet theme running through the Sanico decision, ¹ where a federal judge separated two very different timelines within the same claim and reached two very different results. The court dismissed bad faith on the Loss of Income and Extra Expense components because State Farm kept investigating and paying as calculations matured. But the court let a bad-faith-by-delay claim on the contents coverage go to a jury because the record showed acknowledgment of a total loss early on, with no money moving for months.

Under Mississippi law, a policyholder can prove bad faith even when the claim is eventually paid if the insurer lacked an arguable basis for the delay and the delay rises to the level of gross negligence, tantamount to an independent tort. Not every delay is actionable. Insurers are obligated to thoroughly investigate a claim, but an inadequate investigation or unexplained inaction can push a case to a jury even after payment. The Sanico court quotes Mississippi precedent James v. State Farm Mutual Automobile Insurance Co., 743 F.3d 65 (5th Cir. 2014), and Pilate v. American Federated Insurance Co., 865 So. 2d 387 (Miss. Ct. App. 2004), to emphasize both sides of the line: investigate fully, yes; sit on an obvious payment, no.

On Loss of Income and Extra Expense, the court saw an investigation that moved and payments that followed. A forensic accountant was engaged, numbers were worked, and money was issued in stages. The court held that while there were some delays, they were tied to legitimate evaluation and thus didn’t amount to gross negligence or an independent tort.

The contents story was different. Within a day of the fire, State Farm’s notes reflected that the contents all appeared to be a total loss. The fire’s cause was confirmed accidental a month later. By early July, internal communications recognized that the business personal property loss exceeded policy limits. Yet no funds were paid. No contents payments were paid until August 9, nearly five months after the loss. The judge highlighted those temporal gaps, contrasted them with the more active handling on business income, and concluded that a reasonable jury could find a lack of arguable basis for the delay and gross negligence. That is why the court denied summary judgment on bad faith and related extra-contractual theories for contents.

Two practical teachings follow. First, the duties to investigate coverage and evaluate damages are not a shield against the payment of amounts agreed to be owed. Mississippi gives insurers space to verify, but that space narrows once coverage and scope are essentially undisputed. When the record shows early internal recognition of a total loss, clear excess over limits, and weeks of inactivity with no interim payment, the question of unreasonable delay belongs to a jury. That is the court’s message in sending the contents delay claim forward.

Second, for claims professionals, documentation must tell a story of momentum. In Sanico, the business-income file read like an investigation in motion and survived. The contents file read like an investigation stuck in neutral and did not. The difference wasn’t only what the carrier ultimately paid, it was when and why it paid along the way. A clean, contemporaneous record of partial payments on undisputed amounts and specific reasons for any holds will often be the difference between a summary judgment finding of good faith conduct and a jury question under Mississippi law.

For policyholders, the takeaway is equally sharp. If the insurer acknowledges a total loss or recognizes that limits are owed, press for payments. Don’t accept silence. Mississippi and most states allow recovery for bad faith by delay, even where the claim is not denied. The question is whether the insurer had an arguable reason to wait or delay payment. Insurers should pay claims as quickly as they can. The Sanico record illustrates both ends of that spectrum in a single claim file.

My view is that many contents claims are not promptly investigated, evaluated, or paid. Most insurers simply do nothing until the insured turns over a list, and then they start the investigation and evaluation. I noted this long ago in Contents Claim Adjusting Is Tedious, Time Consuming and Few Insurance Carriers Do It Right.  An example of contents bad faith claims handling was discussed in Contents Claims Are Important and FedNat Does Not Adjust Contents Claims.

Thought For The Day 

For years now I have heard the word ‘Wait!’ … We must come to see, with one of our distinguished jurists, that ‘justice too long delayed is justice denied.’ 
—Martin Luther King Jr.

¹ Sandras v. State Farm Fire & Cas. Co., No. 1:2-cv-5 (S.D. Miss. Sept. 5, 2025).