Although there’s not one specific definition of bad faith, it’s generally when the insurance company is being unfair or unreasonable to its policyholders. An insurance company could be acting in bad faith if it doesn’t deliver the coverage contracted in your policy.
An insurance company might be acting in bad faith if it:
- Denies coverage without a reasonable basis for doing so
- Uses deceptive business practices
- Avoid paying a valid claim by misrepresenting coverage
- Delays a payment without a reasonable basis
- Uses an undisputed percentage of a claim as a condition for paying the disputed portion
- Provides lower compensation than necessary without a reasonable basis
- Requires documentation that’s burdensome or causes unnecessary delays in processing a claim
- Unfairly charges higher premiums after the insured files a claim
- Fails to communicate with the insured promptly
- Fails to conduct a thorough, reasonable, and timely investigation into a claim
- Fails to reach a resolution (accepting or denying a claim) within a reasonable amount of time
- Wrongfully fails to renew or cancels a policy
