Bad Faith (Insurance)
A legal term for an insurance company handling a claim dishonestly or unreasonably, such as denying a valid claim without proper investigation or deliberately delaying payment, which can expose the insurer to legal liability beyond just the original claim amount.
Why it matters
A policyholder has a right to a fair, timely claims process, and bad faith is the legal concept that exists specifically to hold an insurer accountable when it fails that duty. Recognizing the difference between a legitimately disputed claim and bad faith handling matters for anyone navigating a contested claim.
On a real project
An insurer denies a clearly valid roof claim without ever sending an adjuster to inspect the damage, a pattern a policyholder's attorney argues in court constitutes bad faith handling rather than a reasonable, good-faith coverage dispute.
Who this matters most to
A Construction Attorney evaluates whether an insurer's claim handling crossed the line from a legitimate coverage dispute into bad faith, since the legal remedies available differ significantly between the two.
Where this goes wrong
A policyholder assumes any claim denial automatically counts as bad faith and pursues a bad faith legal claim without real evidence the insurer acted unreasonably. The claim is dismissed, since a good-faith, reasonably investigated coverage dispute, even one the policyholder disagrees with, doesn't meet the legal bar for bad faith.