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What are “bad faith” actions on the part of insurance companies?

On Behalf of | Jun 4, 2020 | Insurance Law

As a business owner, you rely on your insurance policy to protect both your business and your employees. While your insurance company has a duty to you as a policyholder, though, they may not always uphold their end of the agreement. This failure to uphold their obligations to you can impact your business’s profits and long-term viability. Identifying when a company acts in bad faith can be key to taking legal action against your insurance company and getting the financial support that you are due as a policyholder.

What actions are done in “good faith”?

Insurance companies are free to deny claims if they uphold their legal responsibilities. This includes investigating a claim thoroughly and promptly, responding to claims in reasonable time, providing reasons for a denial and acting in good faith. Good faith generally involves speaking honestly with policyholders and treating them fairly according to commercial standards.

What are “bad faith” actions by an insurer?

Bad faith actions are generally a failure on the part of insurance companies to uphold their agreement with a policyholder. Examples of these bad faith actions include:

  • Misrepresenting the specifics of a policy or its coverage
  • Failure to explain the reason for a claim denial
  • Lack of communication with policyholders regarding their claim
  • Unreasonable delays in investigating a claim
  • Improper investigation of a claim
  • Refusal to pay or settle a reasonable claim

If you or your business filed a claim and your insurance company responded in bad faith, you may be eligible for compensation. This can include money for the unpaid insurance benefits you were due, the financial impact that your insurer’s bad faith action had on your business and its profits and other damages.