An insurer's unfair handling of a claim made against its policyholder.

Break that down. "Third-party" means the injured person is making a claim against someone else's liability insurance, not asking for benefits under their own policy. "Bad faith" means the insurer does not act honestly, reasonably, or with proper regard for its insured's interests. That often shows up when the company ignores clear liability, refuses a fair settlement demand, fails to investigate, drags its feet, or gambles with the insured's money by rejecting a chance to settle within policy limits. If that gamble leads to a verdict above the policy limit, the insured may face an excess judgment and may have a bad-faith claim against the insurer.

In practice, this matters after serious crashes and other injury cases where medical costs, lost wages, and long recovery can push damages past available coverage. On a busy stretch like I-80 between Omaha and Lincoln, one poor settlement decision can expose a driver or trucking company to major personal liability. A third-party bad-faith claim is usually about the insurer's conduct toward its own insured, even though the injured person is the one who first brought the claim.

In Nebraska, claim-handling standards are addressed in the Unfair Insurance Claims Settlement Practices Act, Neb. Rev. Stat. § 44-1536 (2024), enforced by the Nebraska Department of Insurance. That law helps set the ground rules, but a bad-faith lawsuit usually turns on whether the insurer breached its duties, including the duty to defend and the duty to settle reasonably.