Bad Faith Insurance Lawsuits

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jun 19, 2018

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All insurance policies contain an implied obligation applicable to the insurance company of “good faith and fair dealing” towards its insured. When a claim is presented, this implied obligation means that an insurance company cannot simply look for reasons not to pay. Instead, the company must make a thorough investigation of the claim, must consider all reasons and circumstances that might support the claim, and must give as much consideration to the financial interest of the insured as it gives to its own financial interest.

If an insurance company refuses to pay a claim that should be paid or offers to settle a claim for less than it knows the claim is worth or denies a claim without adequate investigation, this could give rise to a so-called bad faith claim against the insurance company, i.e., a claim that the company has breached its implied obligation of good faith and fair dealing. If the company is found to have acted in bad faith in its handling of a claim, the insured is entitled to all damages resulting from that action, including certain types of damages that would not be available just for breach of contract. In cases of extreme or outrageous misconduct by an insurance company, the insured also may be entitled to receive punitive damages.

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