Insurance

Insurance bad faith refers to the failure of an insurance company to pay out on a legitimate claim by one of its insured. By entering into a contract with clients, insurance companies are required by law to honor claims for covered services, and if they reject a claim without a valid reason they can be prosecuted.

Types

There are several types of bad faith that can be committed by insurance companies. Types of insurance bad faith include:

• Denying a claim
• Failing to investigate a claim
• Delaying payment
• Paying out on only part of a claim
• Wrongly interpreting the language of the policy in order to deny coverage
• Denying all claims when they are first filed

The only instances where an insurance company has the right to deny a claim are:

• If the insured does not live up to the insurance contract - by not paying premiums, etc.
• If the claim is not covered, as outlined in the insurance policy
• If the claim is fraudulent