Updated April 6, 2024
What Is Insurance Bad Faith?
Insurance is something that’s part of our everyday lives and something that oftentimes people don’t have a choice of whether they want to take part in or not. Look at car insurance. A lot of people have homeowners policies, renters insurance.
The thing about insurance is that, usually, the average, everyday person doesn’t have a whole lot of power deciding what the terms of their insurance policy is. Usually, they will get an insurance policy, and they’ll be told to either sign it or don’t sign it. There is sometimes 20 to 40 pages of stuff that’s written by an attorney that the everyday, average person doesn’t understand all the time.
To combat that, there is something called insurance bad faith. Basically, what that means is that an insurance company has to abide by the policy that it enters into with its insureds, and it can’t intentionally, maliciously, or recklessly refuse to abide by those policy provisions. Not only that, but it can’t use its status as a big insurance company to lean on its insureds and make its insureds do something that they don’t want to do because they’re worried about losing their insurance.
We’ll give you some examples of what constitutes bad faith in another segment, but basically insurance bad faith is where the insurance company refuses to abide by its policy terms intentionally or maliciously.
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