I frequently get asked “what is insurance bad faith?” In a nutshell, insurance bad faith has been defined as a breach of the obligation to “deal fairly with an insured, giving equal consideration in all matters to the insured’s interests.” The legislature and courts imposed the duty to act in good faith on insurance companies for various reasons, namely the high stakes typically involved in insurance claims and because an insured is highly dependent on an insurance company to handle his or her claim appropriately.
The typical example of an insurance company acting in bad faith is when it denies an insurance claim without a reasonable basis. But an insurance company can also act in bad faith by refusing to provide a defense or by requiring an insured to submit form after form that essentially contains the same information. As a matter of fact, an insurance company must comply with numerous legislatively enacted statutes and regulations when handling an insurance claim.
The judicial remedy to a victim of insurance bad faith includes special and general damages found under tort law/personal injury action. However, unlike like a typical personal injury action (e.g., negligence), a victim of bad faith can also seek attorney fees under both case law and statutory law. For example, the Insurance Fair Conduct Act (IFCA) authorizes the court to award attorney fees to a plaintiff if he or she prevails against an insurance company.
- Insurance co. that denied benefits to elderly woman loses court fight (seattlepi.com)
- Public Adjuster Discovers Bombshell Involving Insurance Payments On Commercial Hurricane Claims …Millions of Dollars Not Paid To Texas Insureds (prweb.com)