What does bad faith mean in the insurance context?

There is really no standard definition of bad faith, but most states define it as unreasonable or unfair conduct by an insurance company. There are a number of actions by an insurer that are considered bad faith by the courts.

Can an insurer wait until litigation begins to defend its insured?

No. An insurer’s duty to defend Is assessed at the outset of a case. If it is subsequently determined that there was no coverage at the time of the incident giving rise to the claim, an insurer may withdraw from representation.

What are some examples of conduct that are considered bad faith?

The following actions by an insurer are considered bad faith:
• The unreasonable denial of a claim
• Inadequate or improper claim investigation
• Delay in payment
• Deception
• Misrepresentation of coverage to avoid paying an otherwise valid claim
• Conditioning payment of an undisputed portion of a claim on settlement of a disputed portion
• Failure to communicate
• Making oppressive demands on the insured
• Wrongful cancellation or nonrenewal of policy
• Unfair imposition of higher premiums for filing a claim
• Exploitation of insured’s vulnerable position

What is a statute of limitations?

A statute of limitations is the time period in which a formal claim must be filed. These time limitations typically vary by subject matter and by jurisdiction, and are set by state law. However, keep in mind that an insurance policy may have its own contractual time frame that requires a claim or lawsuit be filed within a given time that may differ from stat law.

How important is the information in an insurance application?

You are responsible for information you supply in an insurance application and will likely answer many questions from a sales agent when applying for a policy. You are responsible for the information on the application; make sure that your answers are true and accurate. Do not allow an agent to rephrase your answers in his or her own words. Any dishonesty or deceit can be used against you to deny your claims or cancel your policy, depending on the policy contract language.