What Is a Bad Faith Claim?
When an insurance company fails to uphold the duties it owes to its policyholders, the insurance company has committed a bad faith act.
Insurance companies owe their policyholders (or “insureds”) important duties by virtue of the insurance contract, including the duty of good faith and fair dealing. For example, when a policyholder files a claim with his or her insurance company, the insurer is required to conduct a reasonable and full investigation into the claim. The insurance company cannot arbitrarily deny the claim, delay payment, or decide to pay less than the full value of benefits owed under the insurance policy.
Unfortunately, these and other bad faith practices have become far too common in the insurance industry. While many insurers are more than happy to accept a policyholder’s premiums, they have been less than willing to pay out the same policyholder’s legitimate claims — even when those claims clearly are covered by the policies they issued.