Alabama

Alabama does not have a private right of action for bad faith. It does however have case precedent.

National Sec. Fir and Cas. Co. v Bowen, 417 So. 2d (1982), involved the appeal of a denial of an insurer’s motion for directed verdict for refusal to pay a claim for improperly denying a claim. The Bowen court found that an issuer may properly deny a claim where it has a legitimate or arguable reason not to pay a claim. An insured must establish: a) and insurance contract between the parties existed and the defendant breached same, b) an intentional refusal to pay the insured’s claim, c) the absence of any reasonably legitimate reason for that refusal, d) the insurer’s actual knowledge of the absence of any legitimate or arguable reason, and e) if intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer’s intentional failure to determine what there is a legitimate or arguable reason to pay the claim.

Alabama also allows third party claims for bad faith. In Chavers v National Sec. Fire , 404 So. 2d 1 (1981), Alabama confirmed recovery is allowed against the insurer where the insurer wrongfully refuses, either negligently or intentionally (in liability coverage situations), to settle a third party claim within policy limits, and where an excess judgment results against the policyholder of an amount in excess of the policy.