What is Bad Faith?

Posted Wednesday, April 20, 2011 by Ed Harper

You have asked “what is bad faith” when a jury rendered a verdict in excess of your limits when your insurance company offered less than your limits and was turned down. This is an example of what I would consider a potential bad faith claim. The mere fact a jury rendered a decision for greater than the policy limits does not automatically entitle an insured to bring a claim. However, an insured can take steps to encourage his/her own insurance company to pay the limits, or for an amount within the insurance limits, so as not to damage their own credit. For example, you should consider writing a letter to your own insurance company to encourage them to settle for an amount within your limits, and if a decision is rendered in excess of limits, you would hold them accountable and liable for an excess verdict. This puts more pressure on your insurance company to settle.

With the scenario of $55,000 offered, and declined, a jury would have to inquire into the steps taken by the insurance company in investigating the claim. Questions such as: Were these investigation steps reasonable? Was any investigation done into comparable cases? Was the insurance company thorough in the due diligence they exercised?

An insurance company must act in good faith with their insured, however, a decision against their insured, for more than policy limits, however, does not always equal bad faith.

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