A claim against an insurance company for failure to deal fairly with a policyholder. The responsibility of the insurance company to act in good faith automatically exist in every insurance contract.
An insurance company which fails to act fairly toward its client can be sued on a tort claim as well as on a breach of contract claim. Each state has a different bad faith law. In most states, bad faith law allows a policyholder to be compensated for the value of the original claim, any additional losses that occurred as a result of the insurance company’s conduct, as well as punitive damages and attorney’s fees.
Examples of insurance company bad faith include:
- Failing to defend an insured’s worthy claim
- Failing to properly investigate an insured’s case
- Improperly processing a claim
- Improperly denying a claim
- Failing to pay a covered claim
- Failing to pay a claim promptly
- Placing the insurance company’s interests above the insured’s during litigation or
- Denying a covered claim
- Making mistakes that affect the insured’s receiving coverage,
- Other negligent or fraudulent acts by the insurance company that affect the insured’s insurance policy or coverage