Insurance DOI Complaint and Bad-Faith Demand — Alabama

Insurance DOI Complaint and Bad-Faith Demand (ALABAMA)

Quick-Reference Summary

Part A — ALDOI Complaint Cover Letter

[SENDER NAME / LAW FIRM LETTERHEAD]
[Street Address]
[City, AL ZIP]
Telephone: [____________]
Email: [____________]
Alabama State Bar No.: [____________]

Date: [__/__/____]

Via U.S. Mail and Online Submission

Alabama Department of Insurance
Consumer Services Division
P.O. Box 303351
Montgomery, AL 36130-3351
Phone: 334-241-4141
Online: https://sbs.naic.org/solar-web/pages/public/onlineComplaintForm/onlineComplaintForm.jsf?state=al

RE: REQUEST FOR INVESTIGATION — Unfair Claim Settlement Practices Under Ala. Code § 27-12-24 and Ala. Admin. Code r. 482-1-125

[Department / Sir / Madam]:

I submit this complaint and request that the Department open an investigation into [INSURER NAME] for unfair claim settlement practices under Ala. Code § 27-12-24 and the claims-handling rules at Ala. Admin. Code r. 482-1-125 (property/casualty) and/or r. 482-1-124 (life/accident/health), as applicable.

1. Claim Summary. On [__/__/____], the Insured sustained a covered loss consisting of [DESCRIBE]. The Insured timely reported the loss on [__/__/____], complied with all conditions precedent, and submitted a sworn proof of loss on [__/__/____].

2. Violations of Claims-Handling Rules — Ala. Admin. Code r. 482-1-125 (Property/Casualty).

3. Substantive Violations — Ala. Code § 27-12-24. [INSURER] has engaged in unfair claims settlement practices, including (without limitation):

☐ Knowingly misrepresenting facts or policy provisions
☐ Failing to acknowledge / act promptly on communications
☐ Failing to adopt and implement reasonable standards for prompt investigation
☐ Refusing to pay without conducting a reasonable investigation
☐ Failing to affirm or deny coverage within a reasonable time
☐ Failing to attempt good-faith prompt fair settlement where liability is reasonably clear
☐ Compelling insured to litigate by offering substantially less than amounts ultimately recovered
☐ Failing to provide reasonable explanation of denial basis in policy
☐ Other: [____________]

4. Detailed Facts (with dates).

[Chronological narrative — dates, names of adjusters, communications, low-ball offers, IA/expert engagements, expert reports, internal-reserve information if known.]

5. Requested Action.

(a) Open an investigation under § 27-2-25 and the Department's market-conduct authority;
(b) Direct [INSURER] to respond and produce its complete claim file;
(c) Determine whether [INSURER]'s conduct violates § 27-12-24 and the claims-handling rules;
(d) Take such administrative action — cease-and-desist, fine under § 27-12-17 (up to $5,000 per violation; up to $50,000 for knowing violation), corrective action, or license sanctions — as the Commissioner deems appropriate; and
(e) Provide the Insured/Complainant with a copy of [INSURER]'s response.

6. Enclosures (☐):

☐ Authorization for release of claim file (if represented by counsel)
☐ Policy declarations and endorsements
☐ Proof of loss
☐ Denial / partial-pay / RoR letters
☐ Communications log
☐ Estimates, expert reports, photographs
☐ Chavers demand letter (Part B, sent contemporaneously)

Respectfully,

[CLAIMANT NAME] / [ATTORNEY NAME]
(as appropriate)

Part B — Bad-Faith Demand Letter to Carrier (Chavers Notice)

[SENDER NAME / LAW FIRM LETTERHEAD]

Date: [__/__/____]

Via Certified Mail, Return Receipt Requested, No. [____________]
And Via Email to: [____________]

[CLAIMS MANAGER / GENERAL COUNSEL]
[INSURER FULL LEGAL NAME]
[Street Address]
[City, State ZIP]

RE: ALABAMA BAD-FAITH DEMAND — Chavers / Bowen / Brechbill Notice
Insured: [CLAIMANT FULL NAME]
Policy No.: [____________] Claim No.: [____________]
Date of Loss: [__/__/____]
Amount Demanded: $[__________]

Dear [Claims Manager]:

This firm represents [CLAIMANT NAME] ("Insured") regarding the above-referenced first-party claim. This letter is a formal demand for payment of all benefits owed under the Policy and notice of the Insured's intent to pursue the common-law tort of bad faith refusal to pay, including "normal" bad faith under Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981), and "abnormal" bad faith under State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999), and progeny.

FORWARD IMMEDIATELY TO YOUR BAD-FAITH UNIT, COVERAGE COUNSEL, AND EXCESS CARRIER.

I. Policy and Loss

II. Insured's Performance

The Insured has fully performed every condition precedent, including:

☐ Timely notice of loss
☐ Cooperation with investigation
☐ Submission to EUO (if requested)
☐ Production of all requested records
☐ Sworn proof of loss
☐ Premium fully paid

III. Normal Bad Faith — Chavers / Bowen Elements

Under Nat'l Sec. Fire & Cas. Co. v. Bowen, 417 So. 2d 179 (Ala. 1982), a normal bad-faith claim requires:

(a) A contract and breach. The Policy is a valid, mutually binding insurance contract that [INSURER] has breached by failing to pay the covered loss.

(b) Intentional refusal to pay. [INSURER] has intentionally refused to pay, as evidenced by [_______].

(c) Absence of any reasonably legitimate or arguable reason. No "debatable reason" supports the refusal because:

(d) Actual knowledge of the absence of legitimate reason. [INSURER]'s actual knowledge is shown by [internal reserves, supervisor notes, IA recommendation overridden, internal documents].

(e) Intentional failure to determine lawful basis (alternative). [INSURER] intentionally failed to investigate [specific issue], including by [____________].

The Insured is entitled to a directed verdict on the contract claim because the loss is plainly within the insuring agreement and no exclusion applies. See State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 313–14 (Ala. 1999) (directed-verdict-on-contract standard for normal bad faith).

IV. Abnormal Bad Faith — Slade / Brechbill Theories

Even if a directed verdict on the contract claim were not available, the Insured states an abnormal bad-faith claim under one or more of the four recognized theories:

☐ (1) Intentional or reckless failure to investigate. [INSURER] failed to [interview key witnesses / inspect the loss site / consider documentation provided], demonstrating intentional or reckless disregard for the proper investigation of this claim.

☐ (2) Intentional or reckless failure to subject the claim to cognitive review. Internal documents will show that no genuine evaluation or cognitive analysis was performed.

☐ (3) Manufacture of a debatable reason. [INSURER] manufactured the stated basis for denial after the fact, including by [retaining a biased expert / mischaracterizing policy terms].

☐ (4) Reliance on an ambiguous policy provision. The Policy provision relied upon for denial — "[QUOTE]" — is ambiguous under Alabama rules of contract construction and must be construed in favor of the Insured. Ala. Farm Bureau Mut. Cas. Ins. Co. v. Goodman, 188 So. 2d 268 (Ala. 1966); St. Paul Fire & Marine Ins. Co. v. Edge Mem'l Hosp., 584 So. 2d 1316 (Ala. 1991).

Note: State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013), held there is one cause of action for bad faith with multiple theories, and that a debatable reason defeats the claim. The Insured contests any debatable reason — none exists.

V. Damages Demanded

VI. Demand

Within thirty (30) days of delivery (or 45 days if the matter requires further investigation by [INSURER] and is so confirmed in writing):

1. Pay the full amount due of $[__________];
2. Provide a written explanation of any continued denial citing the specific policy provision and factual basis;
3. Confirm preservation of all claim-file materials (see Section VII);
4. Disclose all related coverages (umbrella/excess, other policies); and
5. Confirm in writing receipt of this Chavers demand.

If [INSURER] fails to comply by [__/__/____], the Insured will file suit in the Circuit Court of [____________] County, Alabama, asserting (a) breach of contract, (b) normal bad faith under Chavers, (c) abnormal bad faith under Slade/Brechbill theories, and seeking compensatory damages, mental anguish, and punitive damages.

VII. Document Preservation / Litigation Hold

[INSURER] is on formal notice to preserve and not destroy:

☐ Complete claim file (paper, electronic, all versions)
☐ Adjuster activity log, claim notes, diary
☐ Reserves history and reserve-change documents
☐ Internal communications (email, IM, recorded calls, voicemails)
☐ Supervisor review and authority approvals
☐ Retained-expert reports, drafts, retention letters, payment records
☐ Claims-handling manuals, bulletins, and guidelines in effect during claim period
☐ Training materials for assigned adjusters
☐ Audit/QA reviews of this claim
☐ Underwriting file (esp. application, prior inspection reports)
☐ Reinsurance communications relating to coverage position
☐ Backup tapes, archived ESI, cloud copies

Spoliation may result in adverse-inference instructions and sanctions under Ala. R. Civ. P. 37 and Smith v. Atkinson, 771 So. 2d 429 (Ala. 2000).

VIII. Reservation

All rights and remedies of the Insured are expressly reserved, including under Ala. Code § 27-12-24 (administrative), § 27-1-17 (health), the Chavers/Bowen/Slade/Brechbill line of common-law authority, and any applicable federal statutes.

Respectfully,

[ATTORNEY NAME]
Alabama State Bar No. [______]
Counsel for [CLAIMANT NAME], Insured

cc: ☐ Insured ☐ File ☐ Alabama Department of Insurance ☐ Co-counsel

Part C — Pre-Filing Checklist

Threshold

☐ Confirm claim is first-party (third-party Tyger River-equivalent = Waters v. Am. Cas. duty)
☐ Confirm insurance contract existed and premiums fully paid (Metmor Financial / Schoepflin contract requirement)
☐ If UM/UIM, confirm "legally entitled to recover" from tortfeasor (Pontius)
☐ Identify any contributory-negligence issues in underlying liability (pure CN in AL)
☐ Confirm Policy is NOT ERISA-governed (separate preemption analysis)

Chavers/Bowen Elements

☐ Insurance contract — confirmed
☐ Intentional refusal to pay — documented
☐ Absence of debatable reason — analyzed against every stated basis
☐ Actual knowledge of absence — internal documents, reserves
☐ Alternative: intentional failure to determine lawful basis

Directed-Verdict-on-Contract (Normal Bad Faith)

☐ Can plaintiff obtain directed verdict on contract claim?
☐ Is there a fact dispute about coverage that would defeat normal bad faith?
☐ If fact dispute exists, pursue abnormal bad-faith theory instead

Abnormal Bad Faith Theories

☐ Failure to investigate (gather supporting evidence)
☐ Failure to subject claim to cognitive review
☐ Manufactured debatable reason (after-acquired)
☐ Reliance on ambiguous policy provision (ambiguity analysis)

Statute of Limitations

☐ Calendar 2-year SOL for bad-faith tort (Ala. Code § 6-2-38(l))
☐ Calendar 6-year SOL for breach of contract on written policy (Ala. Code § 6-2-34)
☐ Check policy-specific suit-limitation provision (commonly 1-2 years; enforceable if reasonable)

Health-Claim Specifics

☐ Apply § 27-1-17 timing (45/30 days for clean claims)
☐ Calculate 1.5%/month interest on delayed payments
☐ Confirm timing under Ala. Admin. Code r. 482-1-124

Property/Casualty Specifics

☐ Apply Ala. Admin. Code r. 482-1-125 timing
☐ Calculate days missed for each requirement

Punitive Damages Strategy

☐ Plead clear-and-convincing evidence (§ 6-11-20)
☐ Apply § 6-11-21(a) cap (greater of 3× compensatory or $1.5M)
☐ Document willful, malicious, fraudulent, or reckless conduct
☐ Prepare BMW v. Gore / State Farm v. Campbell due-process analysis

Documentation

☐ Complete claim file requested in writing
☐ All denial / partial-pay / RoR letters preserved
☐ Communications log with dates, names, substance
☐ Estimates, photos, expert reports
☐ Internal reserves (sought in discovery)

Procedural

☐ ALDOI complaint filed pro se by client (ALDOI declines to assist counsel-represented consumers) OR informational referral submitted
☐ Chavers demand letter sent by certified mail
☐ Litigation hold issued
☐ Insurer registered-agent verified (Alabama Secretary of State)
☐ Excess carriers identified and noticed

Pre-Send

☐ Removed all <!-- GUIDANCE --> comments
☐ Filled all bracketed placeholders
☐ Reviewed by Alabama-licensed counsel
☐ Calendared 30-day deadline and 2-year SOL

Sources and References

• Alabama Department of Insurance — File a Complaint: https://aldoi.gov/consumers/filecomplaint.aspx
• ALDOI Online Consumer Complaint Form (NAIC SBS): https://sbs.naic.org/solar-web/pages/public/onlineComplaintForm/onlineComplaintForm.jsf?state=al
• ALDOI Mail-in Complaint Form (PDF): https://aldoi.gov/PDF/Consumers/ReqForAssistance.pdf
• Ala. Code § 27-12-24 (Unfair claim settlement practices): https://law.justia.com/codes/alabama/title-27/chapter-12/article-3/section-27-12-24/
• Ala. Code § 27-1-17 (Timely payment of health claims): https://law.justia.com/codes/alabama/title-27/chapter-1/section-27-1-17/
• Ala. Admin. Code r. 482-1-125 (Property/casualty claims handling)
• Ala. Admin. Code r. 482-1-124 (Life/accident/health claims handling)
• Chavers v. Nat'l Sec. Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981)
• Nat'l Sec. Fire & Cas. Co. v. Bowen, 417 So. 2d 179 (Ala. 1982)
• Nat'l Sav. Life Ins. Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982) (directed-verdict standard)
• State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293 (Ala. 1999) (abnormal bad faith)
• White v. State Farm Fire & Cas. Co., 953 So. 2d 340 (Ala. 2006)
• Singleton v. State Farm Fire & Cas. Co., 928 So. 2d 280 (Ala. 2005)
• State Farm Fire & Cas. Co. v. Brechbill, 144 So. 3d 248 (Ala. 2013)
• Pontius v. State Farm Mut. Auto. Ins. Co., 915 So. 2d 557 (Ala. 2005) (UM/UIM "legally entitled to recover")
• Ala. Code § 6-11-20 et seq. (Punitive damages standard and caps)
• Alabama Secretary of State Business Entity Search: https://www.sos.alabama.gov/government-records/business-entity-records

This template is provided by ezel.ai for general informational purposes only. It does not constitute legal advice. Alabama bad-faith law combines high damages potential with an extremely demanding liability standard (directed-verdict-on-contract for normal bad faith; debatable-reason defense). Verify all citations and consult an Alabama-licensed attorney before sending. Last updated: 2026-05-21.