Alabama Insurance Bad Faith Demand Letter

ALABAMA FIRST-PARTY INSURANCE PAYMENT AND BAD-FAITH DEMAND

Scope: This form is for an insured's direct claim for benefits under the
insured's own policy. It is not a third-party claimant's policy-limits demand
and does not state the separate Alabama failure-to-settle standard.

Alabama recognizes one tort of bad-faith refusal to pay with different
methods of proof. A demand letter, delay, inadequate investigation, or
disagreement over amount does not by itself establish the tort. Counsel must
prove the underlying contract and no-legitimate-reason requirements from the
actual record.

CONTENTS

1. Pre-Demand Record
2. Demand Letter
3. Counsel's Bad-Faith Analysis
4. Remedy, Regulatory, and Limitations Cautions
5. Official Sources

1. PRE-DEMAND RECORD

Complete this section before drafting the letter.

A. Policy and parties

Attach the complete policy, declarations, and every endorsement. Do not rely
only on a declarations page, claim summary, or quotation.

B. Loss and performance of conditions

Unperformed, disputed, excused, waived, or allegedly immaterial condition:

[____________________________________________________________]

C. Amount calculation

Identify the policy term, invoice, estimate, expert opinion, record, or
calculation supporting each amount.

D. Insurer decision record

List every legitimate or arguable factual or legal basis the insurer may assert,
including a basis not accepted by the insured:

[____________________________________________________________]

Do not omit an adverse fact. Alabama bad-faith analysis turns on whether a
legitimate or arguable reason existed, not merely on whether the insured
disagrees with the result.

2. DEMAND LETTER

Delivery method: [certified mail / overnight delivery / email / claim portal]

Date: [__/__/____]

To:

[Authorized claims representative]

[Insurance company]

[Mailing and email address]

Re:

Insured: [________________________________]

Policy number: [________________________________]

Claim number: [________________________________]

Date of loss: [__/__/____]

Dear [________________________________]:

This office represents [Insured] concerning the claim identified above. Based
on the policy and supporting record enclosed with this letter, the Insured
requests payment and a written claim decision as set out below.

A. Coverage and claim

The applicable coverage provision states:

"[Quote the complete operative coverage language.]"

The covered loss or event is:

[____________________________________________________________]

The Insured performed the applicable policy conditions as follows:

[____________________________________________________________]

The amount presently claimed under the policy is $[________________], calculated
as follows:

[____________________________________________________________]

Attached supporting materials are indexed as Exhibits [________] through
[________].

B. Claim chronology

C. Insurer's stated position and response

The Insurer stated on [date] that [quote the denial, reservation, valuation, or
request]. The Insured responds:

If the Insurer contends additional information is reasonably required, identify
the exact information, the policy provision authorizing the request, its
relevance, and a practical method for completing the request.

D. Alabama first-party standard

Official opinions applying Alabama law describe the first-party bad-faith
issues as:

• breach of the insurance contract;
• intentional refusal to pay the insured's claim;
• absence of a legitimate or arguable reason for refusal; and
• the insurer's knowledge of that absence.

A failure-to-investigate method additionally requires proof of an intentional
failure to determine whether a legitimate or arguable reason existed. Alabama
recognizes one tort with different methods of proof, and an arguable reason for
denial defeats either method.

The matter-specific facts the Insured asks the Insurer to reconsider are:

[____________________________________________________________]

[____________________________________________________________]

This paragraph is a request for review. It is not a declaration that the tort,
punitive damages, or any other remedy has already been established.

E. Demand

The Insured requests that the Insurer, by [reasonable date, time, and time
zone]:

1. pay the presently claimed policy benefit of $[________________], or identify
   any undisputed amount and issue that payment;

2. provide the calculation for every valuation, deductible, depreciation,
   credit, offset, or prior payment;

3. identify each policy provision and material fact supporting any continued
   denial, reservation, or reduction;

4. identify any additional information reasonably required for a completed
   evaluation; and

5. provide the name and authority of the representative responsible for the
   response.

The response period in this letter is selected for this matter. It is not
presented as a universal Alabama statutory cure period.

F. Preservation request

Please preserve nonprivileged materials relevant to the claim, including the
policy and endorsements, correspondence, submitted records, photographs,
estimates, recordings, inspection materials, payment records, and claim
chronology. This request does not purport to alter privilege, work-product,
retention, or discovery law.

Respectfully submitted,

________________________________________

[Attorney / firm / address / telephone / email / Alabama Bar number]

Counsel for [Insured]

3. COUNSEL'S BAD-FAITH ANALYSIS

Do not send this attorney worksheet as part of the demand unless counsel
intentionally incorporates it.

A. Contract claim

☐ The complete policy and all endorsements were reviewed.

☐ The insured is a proper claimant under the coverage part.

☐ The loss falls within the coverage grant.

☐ Each asserted exclusion, limitation, condition, deductible, and valuation
provision was analyzed.

☐ The insured's performance of post-loss duties is established or a supported
response to alleged nonperformance is documented.

☐ The claimed amount is tied to policy language and admissible proof.

☐ Counsel assessed whether the contract claim is strong enough for judgment as
a matter of law in the ordinary refusal-to-pay case.

B. Intentional refusal and timing

☐ Identify the decision alleged to be an intentional refusal to pay:
[________________________________]

☐ Distinguish denial from investigation, reservation, negotiation, appraisal,
partial payment, and a dispute about amount.

☐ Identify when the Insurer made the decision and what it knew then.

☐ Do not treat the demand's expiration as automatic proof of refusal or bad
faith.

C. Legitimate or arguable reason

☐ List every reason actually stated by the Insurer.

☐ Test each reason under the policy, known facts, and current law.

☐ Identify any genuine coverage or fact dispute.

☐ Determine whether any one reason was at least arguable when the decision was
made.

☐ Avoid alleging bad faith solely because a court could later reject the
Insurer's interpretation.

D. Knowledge or failure to determine

Evidence asserted to show actual knowledge of no legitimate reason:

[____________________________________________________________]

Evidence asserted to show an intentional failure to determine whether such a
reason existed:

[____________________________________________________________]

Investigation steps completed, omitted, delayed, or contradicted:

[____________________________________________________________]

Explain causation and materiality rather than treating every imperfection as
tortious. Official Alabama-law opinions state that an arguable reason defeats
bad faith regardless of investigation imperfections.

4. REMEDY, REGULATORY, AND LIMITATIONS CAUTIONS

A. Punitive damages

Ala. Code § 6-11-20(a) permits punitive damages in a tort action, outside its
listed wrongful-death exception, only upon clear and convincing evidence that
the defendant consciously or deliberately engaged in oppression, fraud,
wantonness, or malice. It expressly creates no claim for punitive damages.

Do not insert a punitive amount or generic cap. Counsel must establish a viable
claim and separately research the current claim- and defendant-specific limits,
exclusions, adjustments, and procedure.

B. Attorney fees, interest, and consequential loss

Do not promise attorney fees, a fixed interest rate, mental-anguish damages, or
other consequential recovery without separate claim-specific authority and
proof. The amount demanded in Section 2 should be limited to supported policy
benefits unless Alabama counsel deliberately adds another verified item.

C. Section 27-12-24

Ala. Code § 27-12-24 addresses refusal to pay or settle without just cause and
with enough frequency to indicate a general business practice. Its text does
not prescribe a private demand deadline, automatic civil remedy, or proof rule
for one disputed claim. Do not plead the section as a stand-alone damages count
without separate current authority.

D. Limitations

Ala. Code § 6-2-38(l) states a two-year period for actions for injury to the
person or rights of another not arising from contract and not otherwise
enumerated in that section. That text alone does not decide classification,
accrual, tolling, relation back, survival, or a separate contract deadline.

Calculate all dates from the actual policy, decision history, claim type, and
current Alabama authority. Do not assume this letter changes any deadline.

5. OFFICIAL SOURCES

Alabama Code

• Ala. Code § 27-12-24:
  https://alison.legislature.state.al.us/code-of-alabama?section=27-12-24

• Ala. Code § 6-11-20:
  https://alison.legislature.state.al.us/code-of-alabama?section=6-11-20

• Ala. Code § 6-2-38:
  https://alison.legislature.state.al.us/code-of-alabama?section=6-2-38

Official U.S. Courts opinions applying Alabama law

• Allen v. USAA Casualty Insurance Co., No. 2:21-cv-01425-RDP,
  memorandum opinion (N.D. Ala. Apr. 7, 2023):
  https://www.govinfo.gov/content/pkg/USCOURTS-alnd-2_21-cv-01425/pdf/USCOURTS-alnd-2_21-cv-01425-1.pdf

• Cole v. Owners Insurance Co., No. 5:16-cv-00834-KOB,
  memorandum opinion (N.D. Ala. Mar. 29, 2018):
  https://www.govinfo.gov/content/pkg/USCOURTS-alnd-5_16-cv-00834/pdf/USCOURTS-alnd-5_16-cv-00834-0.pdf

This form is informational only and requires review and customization by a
qualified Alabama attorney before use.