Bad Faith Insurance Claims

Insurance is based on a contract where an insured (policyholder) pays insurance premiums in exchange for the insurer’s (insurance company) promise to abide by the terms of the policy and pay the insured for valid claims brought by them.

What is Bad Faith Insurance Claims?

Bad faith insurance exists when an insurance company unreasonably fails to act upon the terms of the policy and breaches its contract of dealing fairly with their insureds. In other words, if an insured submits a valid claim to their insurance company, and the company does not handle the claim in a fair manner then the claim can be deemed a bad faith insurance claim.

If an insurance company acts in bad faith, the policyholder may be entitled to receive an amount greater than the original claim. The purpose of bad faith insurance claims lawsuits is two-fold. First, to compensate policyholders for the bad faith practices of insurance companies. Second, to deter insurance companies from bad faith insurance claims by applying a monetary penalty.