Insurance Bad Faith

When a consumer purchases insurance, the insurance company has a legal duty to that consumer to handle claims promptly, reasonably and in good faith and fair dealing. For example, when health insurance is purchased, it is assumed that the health insurer will pay for covered medical care while a car insurance provider is expected to foot the bill in the event of a car accident. Because individuals depend on their insurers to do what is promised, there are laws in place that punish insurers who do not. These laws are referred to as insurance bad faith laws, and they impose civil penalties on any insurance company that unfairly denies a claim or otherwise fails to uphold the agreement made with a consumer. In formal legal terms, this means that the insurer can be held civilly liable if he or she breaches the implied covenant of good faith and fair dealing that exists on the basis of an insurance contract. Consult this section to learn more about the types of behaviors that constitute insurance bad faith, and what recourse is available to consumers.