Preparing Your Case To Be Trial Ready

What does it mean for an insurance company to act in bad faith? 

On Behalf of | Jan 16, 2025 | Business Litigation

If an insurance company denies a claim, it doesn’t automatically mean they are acting in bad faith. Even if someone at the company makes a clear mistake, that alone might not be enough to qualify. It needs to be shown that the company is acting intentionally and for financial gain.

What bad faith looks like will depend on the specifics of the case. Below are a few examples to consider.

Denying claims without reason

First and foremost, a company may be acting in bad faith if they deny a claim without a valid reason. For example, the insurance company may hope the insured party will simply accept the denial and take no further action, failing to investigate the issue further. However, this violates the rights of the insured, as the insurance company is obligated to act in their client’s best interests.

Unnecessarily delaying the process

Another issue arises when insurance companies take too long to respond or fail to respond entirely. They may try to delay the process in the hope that the insured party will give up and drop the claim. While communication doesn’t have to be instantaneous, it should occur within a reasonable timeframe. Prolonged or unnecessary delays may indicate bad faith.

Misrepresenting the terms

Finally, if an insurance company misrepresents the terms of the policy to avoid a payout, this is a clear example of bad faith. The company is required to abide by the contract that was originally signed, not manipulate or reinterpret the terms after the fact.

Taking action

When insurance companies act in bad faith, it’s crucial for those affected to understand all of the legal options available to them and the steps they can take.