Insurance Bad Faith Demand Letter - North Dakota

INSURANCE BAD FAITH DEMAND LETTER

State of North Dakota

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION — FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER N.D. R. EV. 408 AND F.R.E. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[INSURANCE COMPANY NAME]
[________________________________]
[________________________________]
[City], [State] [Zip]

Attention: [________________________________], [CLAIMS OFFICER / VICE PRESIDENT OF CLAIMS]
Re: FORMAL BAD FAITH DEMAND AND NOTICE OF CLAIMS — NORTH DAKOTA

Dear [________________________________]:

I. INTRODUCTION AND NOTICE OF BAD FAITH CLAIMS

This firm represents [________________________________] ("our client") in connection with the insurance claim referenced above under a policy issued by [________________________________] ("[________________________________]"). This letter serves three purposes:

First, it constitutes a formal demand for payment of all policy benefits wrongfully withheld or underpaid in the amount of $[________________________________].

Second, it provides formal notice that [________________________________]'s claims-handling conduct constitutes bad faith in violation of North Dakota common law and the North Dakota Unfair Claims Settlement Practices Act, N.D. Cent. Code § 26.1-04-03(9), and that our client intends to pursue all available remedies, including punitive/exemplary damages under N.D. Cent. Code § 32-03.2-11, if this demand is not honored.

Third, this letter constitutes a preservation notice requiring [________________________________] to retain all claim-related documents and electronically stored information.

Response is required by 5:00 p.m. Central Daylight Time on [__/__/____]. Failure to tender the amount demanded will result in immediate litigation and regulatory complaints.

II. NORTH DAKOTA BAD FAITH LAW — CONTROLLING AUTHORITY

A. The Implied Covenant of Good Faith and Fair Dealing

North Dakota has recognized a common law cause of action for breach of the implied covenant of good faith and fair dealing in the insurance context since at least Corwin Chrysler-Plymouth, Inc. v. Westchester Fire Ins. Co., 279 N.W.2d 638, 641 (N.D. 1979). Every insurance contract in North Dakota contains an implied duty: the insurer must act reasonably and in good faith in investigating, evaluating, and paying legitimate claims made by its insureds.

The North Dakota Supreme Court has since affirmed and developed this doctrine:

• Seifert v. Farmers Union Mut. Ins. Co., 497 N.W.2d 694 (N.D. 1993) — confirmed that bad faith is a tort cause of action separate from breach of contract; bad faith in denying a legitimate claim is actionable
• Volk v. Wisconsin Mortgage Assurance Co., 474 N.W.2d 40, 44–45 (N.D. 1991) — to establish bad faith under the Unfair Claims Settlement Practices statute, plaintiff must show conduct amounting to a general business practice, not merely an isolated act; however, the common law bad faith claim does not require the same frequency showing
• Dundee Mutual Life Insurance Co. v. Marifjeren, 587 N.W.2d 17 (N.D. 1998) — addressed the scope of insurer obligations and damages available in insurance disputes involving bad faith conduct
• Kath v. Farmers Union Mutual Ins. Co., 2024 ND ___ (N.D. 2024) — recent ND Supreme Court decision addressing [confirm specific holding upon Westlaw/Lexis verification]

B. Elements of the Common Law Bad Faith Claim

To establish common law insurance bad faith in North Dakota, our client must prove:

1. The existence of a valid insurance policy and a covered claim
2. The insurer's unreasonable conduct in investigating, evaluating, or settling the claim — conduct not justified by a legitimate dispute over coverage or value
3. The insurer knew or consciously disregarded the unreasonable nature of its conduct
4. Damages caused by the insurer's bad faith conduct (beyond mere policy benefits)

Important North Dakota distinction: Unlike some states, North Dakota does not recognize a separate private right of action directly under the Unfair Claims Settlement Practices Act, N.D. Cent. Code § 26.1-04-03. See Volk, 474 N.W.2d at 45. The statute is enforced administratively by the North Dakota Insurance Department (NDID) and serves as strong evidence of the standard of conduct required of insurers. The common law action for bad faith remains the primary judicial remedy.

C. Punitive / Exemplary Damages — N.D. Cent. Code § 32-03.2-11

North Dakota's exemplary damages statute, N.D. Cent. Code § 32-03.2-11, authorizes punitive damages where the defendant has been guilty by clear and convincing evidence of:

• Oppression — subjecting the claimant to cruel and unjust hardship with conscious disregard for the claimant's rights
• Fraud — deceit, concealment of material facts, or intentional misrepresentation
• Actual Malice — a state of mind characterized by hatred, ill will, or a spirit of revenge, or a deliberate disregard of the rights of others

Statutory cap: Punitive damages may not exceed two times the compensatory damages awarded, or $250,000, whichever is greater. No punitive award may be made unless the claimant receives compensatory damages.

An insurer's sustained pattern of denying clearly covered claims, misrepresenting policy terms, failing to investigate, and compelling litigation can satisfy the clear-and-convincing standard for at least one of these elements.

D. Consequential Damages

Beyond policy benefits, consequential damages flowing from the insurer's breach are recoverable if they were foreseeable at the time of contracting. These may include:

• Costs of alternative financing or emergency measures made necessary by non-payment
• Business interruption losses attributable to the insurer's delay
• Emotional distress (recoverable as a tort damages element where the bad faith is established)
• Attorney's fees and litigation costs (as consequential damages of the bad faith, not under the American Rule)

E. North Dakota American Rule and Attorney's Fees

North Dakota generally follows the American Rule: each party bears its own attorney's fees absent a contract provision, a specific fee-shifting statute, or a court rule authorizing an award. However, attorney's fees incurred as a direct consequence of the insurer's bad faith may be recoverable as consequential damages of the tort.

F. Prejudgment Interest

Pre-judgment interest accrues at 6% per annum under N.D. Cent. Code § 47-14-05 on amounts certain or capable of being made certain. Post-judgment interest for 2026 is 10.00% per N.D. Supreme Court order.

G. Statute of Limitations

• Contract claim (policy benefits): 6 years — N.D. Cent. Code § 28-01-16
• Tort claim (bad faith): 6 years — N.D. Cent. Code § 28-01-16(5)
• Policy suit limitation clauses (commonly 12 months) may apply to the contract claim; consult policy language

III. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Coverage Analysis — The Claim Is Clearly Covered

The loss plainly falls within the policy's insuring agreement:

☐ The cause of loss — [________________________________] — is a covered peril
☐ The event occurred during the policy period
☐ The insured/claimant satisfies all conditions for coverage
☐ No legitimate exclusion bars coverage

[________________________________] [acknowledged coverage by issuing partial payment / initially accepted coverage before reversing course / has not disputed coverage in writing but has failed to pay]. Having accepted or implicitly recognized coverage, [________________________________]'s obligation to investigate, evaluate, and promptly pay this claim is beyond dispute.

IV. FACTUAL BACKGROUND AND CLAIM HISTORY

A. The Underlying Loss

On [__/__/____], [________________________________].

[________________________________]
[________________________________]
[________________________________]

B. Our Client's Compliance with Policy Conditions

Our client has fully complied with all policy conditions:

☐ Timely notice of loss provided on [__/__/____]
☐ Cooperation with investigation — our client submitted to [recorded statement / examination under oath / independent medical examination] on [__/__/____]
☐ Proof of loss provided on [__/__/____]
☐ Access to property / documentation granted on [__/__/____]
☐ All requested documentation provided as of [__/__/____]

C. Chronological Timeline of [________________________________]'s Bad Faith Conduct

V. SPECIFIC BAD FAITH CONDUCT — DETAILED ANALYSIS

The following conduct by [________________________________] individually and collectively demonstrates bad faith under North Dakota common law and N.D. Cent. Code § 26.1-04-03(9):

A. Unreasonable Delay — N.D. Cent. Code § 26.1-04-03(9)(b) and (c)

[________________________________] has unreasonably delayed investigation and payment of this claim:

☐ Despite our client reporting the loss on [__/__/____], [________________________________] did not inspect the property until [__/__/____] — a delay of [____] days with no explanation
☐ After receiving our client's complete documentation on [__/__/____], [________________________________] failed to issue a coverage decision for [____] days
☐ [________________________________]'s adjuster, [________________________________], requested the following information on [__/__/____]: [________________________________]. Our client provided this on [__/__/____]. [________________________________] did not follow up for [____] days.
☐ [Other delay: ________________________________]

Under N.D. Cent. Code § 26.1-04-03(9)(b), an insurer must acknowledge pertinent communications with reasonable promptness. Under § 26.1-04-03(9)(c), the insurer must adopt and implement reasonable standards for the prompt investigation of claims. [________________________________]'s delays satisfy neither standard.

B. Inadequate Investigation — N.D. Cent. Code § 26.1-04-03(9)(c) and (d)

[________________________________]'s investigation of this claim fell below the reasonable standard required under North Dakota law:

☐ The field adjuster spent only [____] minutes inspecting [a property that sustained damage to [________________________________]] and failed to [enter the attic / examine the [________________________________] / photograph [________________________________]]
☐ [________________________________] relied entirely on a desk review rather than a qualified field inspection
☐ [________________________________]'s expert, [________________________________], was retained to reach a pre-determined conclusion and did not consider [________________________________]
☐ [________________________________] failed to consult a qualified [engineer / contractor / specialist] regarding [________________________________], which requires specialized expertise
☐ [________________________________] denied / limited coverage on [________________________________] without obtaining a cause-and-origin determination
☐ [Other: ________________________________]

C. Misrepresentation of Policy Terms — N.D. Cent. Code § 26.1-04-03(9)(a)

[________________________________] has knowingly misrepresented pertinent facts and policy provisions:

☐ [________________________________] represented on [__/__/____] that "[________________________________]," but the policy at [page / section] [________________________________] actually provides: "[________________________________]"
☐ [________________________________]'s denial letter dated [__/__/____] cited exclusion [________________________________] but failed to disclose that the exception to that exclusion — located at [page / section] [________________________________] — applies to our client's loss
☐ [________________________________]'s adjuster told our client on [__/__/____] that [________________________________], which is factually inaccurate because [________________________________]
☐ [Other misrepresentation: ________________________________]

D. Grossly Inadequate Settlement Offers — N.D. Cent. Code § 26.1-04-03(9)(e) and (f)

[________________________________]'s offers bear no reasonable relationship to the documented loss:

A good-faith evaluation of the evidence — including our client's contractor estimate of $[____], the independent assessment of [________________________________] at $[____], and the [NOAA / medical / engineering] data — would have produced a settlement offer far exceeding [________________________________]'s tender. The gap between [________________________________]'s offer and the actual value of the claim is not a bona fide dispute; it is a systematic undervaluation.

E. Compelling Litigation — N.D. Cent. Code § 26.1-04-03(9)(f)

By consistently offering $[____] when the claim is worth $[____], [________________________________] has forced our client to retain counsel and pursue litigation to recover amounts clearly owed. This is precisely the conduct prohibited by § 26.1-04-03(9)(f).

F. Failure to Explain Denial — N.D. Cent. Code § 26.1-04-03(9)(n)

[________________________________]'s [denial letter / inadequate payment explanation] dated [__/__/____] failed to provide a reasonable explanation for its position. The letter states: "[________________________________]." This explanation is inadequate because [________________________________].

G. Pattern of Conduct (If Applicable)

To establish a statutory bad faith claim under N.D. Cent. Code § 26.1-04-03(9), a plaintiff must show the prohibited conduct occurred with a frequency indicating a general business practice. Volk, 474 N.W.2d at 45. The following additional facts demonstrate that [________________________________]'s misconduct in this claim is consistent with a broader pattern:

☐ The NDID has [received / investigated / resolved] prior complaints against [________________________________] regarding similar claims-handling conduct
☐ Other policyholders have experienced similar underpayment / delays involving [________________________________]
☐ [________________________________]'s internal claims guidelines, as produced in [prior litigation / obtained through NDID records], reveal a systematic protocol of [________________________________]
☐ [Other pattern evidence: ________________________________]

NOTE: Common law bad faith does not require proof of a general business practice — it requires only proof of unreasonable conduct in the handling of this specific claim. The pattern evidence strengthens the claim but is not an element of the common law action.

VI. REGULATORY VIOLATIONS — NORTH DAKOTA INSURANCE DEPARTMENT

The conduct described above violates N.D. Cent. Code § 26.1-04-03(9) and is subject to NDID enforcement. Specifically:

The NDID Commissioner may issue a cease-and-desist order and impose civil penalties upon finding violations of § 26.1-04-03. See N.D. Cent. Code § 26.1-04-03(10). We will file a formal complaint with the NDID unless this matter is resolved.

VII. DAMAGES

A. Policy Benefits Wrongfully Withheld

B. Prejudgment Interest

Interest on the undisputed policy benefits at 6% per annum (N.D. Cent. Code § 47-14-05) from [__/__/____] (date payment was due) through [__/__/____]:

$[____] × 6% × [____] years = $[____]

C. Consequential Damages

As a foreseeable consequence of [________________________________]'s bad faith refusal to pay, our client has suffered the following additional losses:

D. Punitive / Exemplary Damages — N.D. Cent. Code § 32-03.2-11

The following facts, provable by clear and convincing evidence, support an award of punitive/exemplary damages:

Oppression:
☐ [________________________________] subjected our client to [displacement from home / financial hardship / [________________________________]] for [____] months with conscious disregard for our client's rights, despite receiving documentation establishing coverage on [__/__/____]

Fraud:
☐ [________________________________] knowingly misrepresented the scope of coverage in its letter dated [__/__/____] when it stated "[________________________________]," which [________________________________] knew to be false because [________________________________]

Actual Malice:
☐ [________________________________]'s claims supervisor, [________________________________], documented in an internal note dated [__/__/____] that "[________________________________]," demonstrating a deliberate decision to undervalue or deny this claim without regard to its merits

Estimated Punitive Damages (subject to cap):

E. Total Demand Summary

VIII. DEMAND

Based on the foregoing, we demand that [________________________________] do the following by [__/__/____] at 5:00 p.m. CDT:

1. Tender payment of $[________________________________] representing all policy benefits, interest, and consequential damages as itemized above
2. Provide written confirmation that all claim-related documents and ESI have been preserved in accordance with this letter's document preservation notice
3. Confirm in writing that [________________________________] withdraws any reservation of rights or coverage denial letter, to the extent any has been issued, and acknowledges coverage for the loss described herein

IX. CONSEQUENCES OF NON-COMPLIANCE

If [________________________________] fails to tender the demanded amount by the deadline, our client will immediately pursue the following remedies:

1. Filing suit in [________________________________] County District Court, State of North Dakota, asserting:
   - Breach of contract (policy benefits)
   - Breach of the implied covenant of good faith and fair dealing (Corwin Chrysler-Plymouth / Seifert)
   - Tortious bad faith
   - Consequential damages
   - Punitive/exemplary damages under N.D. Cent. Code § 32-03.2-11 (clear and convincing evidence of oppression, fraud, or malice)
   - Prejudgment interest at 6% per annum under N.D. Cent. Code § 47-14-05

2. Filing a formal regulatory complaint with the North Dakota Insurance Department (NDID), 600 E. Boulevard Avenue, Dept. 401, Bismarck, ND 58505-0320; (701) 328-2440 seeking:
   - Investigation of violations of N.D. Cent. Code § 26.1-04-03(9)
   - Issuance of a cease-and-desist order under § 26.1-04-03(10)
   - Civil penalties

3. Filing a complaint with the NAIC Consumer Insurance Search tool

4. Seeking all available post-judgment remedies, including execution on judgment at the 2026 post-judgment interest rate of 10.00% per N.D. Supreme Court order

X. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal and immediate notice that [________________________________] must preserve all documents, data, and electronically stored information ("ESI") related to this claim, including without limitation:

Claim File Materials:
☐ Complete claim file in all drafts, revisions, and versions
☐ All claim notes, diaries, and activity logs
☐ All initial, supplemental, and internal estimates
☐ All field inspection photographs, videos, and sketches
☐ All medical records, bills, or reports obtained by [________________________________]
☐ All engineering, expert, or contractor reports and supporting data
☐ Reserve documentation (initial reserve, all reserve changes, and reasons for changes)

Communications:
☐ All correspondence with our client (letters, emails, texts, voicemails)
☐ All internal emails, memos, and communications about this claim
☐ All communications with independent adjusters, engineers, or outside vendors
☐ All recorded statements in audio/video/transcript form

Policy and Guidelines:
☐ Policy, all endorsements, and all versions of the declarations page
☐ Claim handling guidelines, procedures, and manuals in effect at the date of loss
☐ Adjuster training materials applicable to this type of claim
☐ Supervisor approval documentation and quality control / audit records
☐ Xactimate or other estimating software data files and underlying price lists

Regulatory / Compliance:
☐ All prior NDID inquiries, complaints, or orders regarding [________________________________] or similar claims
☐ Statistical data or reports reflecting denial or underpayment rates for similar claims

Failure to preserve this material will result in a motion for spoliation sanctions in any subsequent litigation.

XI. CONCLUSION

North Dakota insurers occupy a position of substantial power relative to their policyholders. The bad faith doctrines developed in Corwin Chrysler-Plymouth and its progeny, and the standards codified in N.D. Cent. Code § 26.1-04-03, exist to prevent insurers from exploiting that power differential to deny or underpay legitimate claims.

Our client submitted a legitimate, documented claim. [________________________________]'s response has been [describe in one sentence: e.g., "a series of delays, misrepresentations, and grossly inadequate offers that bear no relationship to the evidence"]. This is precisely the conduct North Dakota bad faith law was designed to address.

We strongly urge [________________________________] to take this demand seriously, review the evidence in good faith, and tender the full amount demanded. The alternative — continued bad faith and ensuing litigation — exposes [________________________________] to substantial liability for compensatory, consequential, and punitive damages under North Dakota law.

Please direct all communications in response to this letter to the undersigned.

Respectfully submitted,

[________________________________]

By: ___________________________
[________________________________]
N.D. State Bar No. [____]
[________________________________]
[City], ND [Zip]
[________________________________] (Tel.)
[________________________________] (Fax)
[________________________________] (Email)

Counsel for [________________________________]

ENCLOSURES:

☐ Policy declarations page and all endorsements
☐ Our client's complete claim chronology and correspondence log
☐ Our client's contractor / expert estimate: $[____]
☐ [________________________________]'s estimate and all denial / underpayment correspondence
☐ Proof of loss (dated [__/__/____])
☐ All supporting documentation of loss (photographs, reports, records)
☐ Consequential damages documentation
☐ [Other: ________________________________]

CC:

• [________________________________] (Client)
• North Dakota Insurance Department (NDID) — 600 E. Boulevard Ave., Dept. 401, Bismarck, ND 58505-0320 (via concurrent formal complaint)

NORTH DAKOTA BAD FAITH LAW — QUICK REFERENCE

SOURCES AND REFERENCES

• N.D. Cent. Code § 26.1-04-03 (Unfair Claims Settlement Practices): https://codes.findlaw.com/nd/title-26-1-insurance/nd-cent-code-sect-26-1-04-03/
• N.D. Cent. Code Chapter 26.1-04 (full chapter): https://ndlegis.gov/cencode/t26-1c04.pdf
• N.D. Cent. Code § 32-03.2-11 (Exemplary Damages): https://codes.findlaw.com/nd/title-32-judicial-remedies/nd-cent-code-sect-32-03-2-11/
• N.D. Cent. Code Chapter 32-03.2 (Fault, Damages, Payments): https://ndlegis.gov/cencode/t32c03-2.pdf
• Corwin Chrysler-Plymouth, Inc. v. Westchester Fire Ins. Co., 279 N.W.2d 638 (N.D. 1979)
• Seifert v. Farmers Union Mut. Ins. Co., 497 N.W.2d 694 (N.D. 1993): https://law.justia.com/cases/north-dakota/supreme-court/1993/920109-3.html
• Volk v. Wisconsin Mortgage Assurance Co., 474 N.W.2d 40 (N.D. 1991): https://law.justia.com/cases/north-dakota/supreme-court/1991/900436-3.html
• Kath v. Farmers Union Mutual Ins. Co. (N.D. 2024): https://law.justia.com/cases/north-dakota/supreme-court/2024/20240068.html
• Chartwell Law — North Dakota Bad Faith Overview: https://www.chartwelllaw.com/bad-faith-claims-map/north-dakota
• ALFA International — North Dakota Insurance Law Compendium: https://www.alfainternational.com/compendium/insurance-law/north-dakota/
• Insurance Consumer Rights in North Dakota (United Policyholders): https://uphelp.org/claim-guidance-publications/insurance-consumer-rights-in-north-dakota-2022/
• North Dakota Insurance Department: https://www.insurance.nd.gov
• ND Courts — Interest Rate on Judgments for 2026: https://www.ndcourts.gov/news/north-dakota/north-dakota-supreme-court/general-news/interest-rate-set-for-2026-judgments