Bad faith is dishonesty or fraud within a transaction.
What Bad Faith Means in Layman’s Terms
Bad faith happens when an insurance company refuses to fulfill its contractual obligations or deliberately avoids engaging in a fair, reasonable way with its policyholder or a claimant. Instead of evaluating your claim honestly, the insurer may take steps to delay, devalue, or deny your claim without cause. These tactics are not just frustrating; they may be unlawful.
What This Means for You
Dealing with an insurance company can be challenging under the best of circumstances, especially when you’re already coping with a serious injury or loss. While not every disagreement qualifies as bad faith, some insurers engage in conduct that crosses the line into illegal behavior.
ISC § 2601 prohibits insurers from engaging in “unfair settlement practices.”
If this occurs, you have the right to hold the insurance company accountable for refusing to honor its obligations.
Examples of Bad Faith/Unfair Settlement Practices
Bad faith can take many forms. Some common examples include:
- Unreasonable denial of a valid claim, even when evidence clearly supports your losses
- Delaying payment or failing to investigate a claim promptly, hoping you will give up or accept less than you deserve
- Misrepresenting policy terms, such as telling you a benefit does not exist when it clearly does
- Failing to conduct a fair or thorough investigation, or ignoring medical records, witness statements, or other critical evidence
- Offering an unreasonably low settlement, far below what the policy should cover
- Threatening a claimant or policyholder
- Refusing to communicate, respond to inquiries, or explain the basis for a denial
- Ignoring a claim entirely
- Failing to promptly disclose coverage
- Intentionally prolonging a dispute by submitting “reasonably rendered claims to the independent dispute resolution process”
- Delaying a claim by requesting evidence that the insurance company already has or doesn’t need
- Repeatedly transferring a claim to other insurance adjusters in the hopes the claimant will give up
If you believe an insurance company behaved in bad faith, you have options.
