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Are you guilty of bad faith?

According to upcounsel, a person or entity is guilty of bad faith if he or she does something immoral in a legal matter. Something "immoral" may include not following through with contractual obligations, entering an agreement you know you will not honor, knowingly giving the wrong idea to others regarding legal matters and acting deceitfully in a legal capacity. If you commit bad faith as an insurer in Kentucky, the insured party against whom you committed the offense can file a lawsuit over breach of trust. If the courts find you guilty, you may be in a world of legal trouble. For this reason, it is imperative that you know what insurance bad faith looks like so you can avoid it.

In an insurance environment, bad faith looks slightly different than it would in any other capacity. Yes, bad faith still occurs when you break your legal commitment to another party, but when dealing with coverage, there are several ways in which you can break your contract. Some are more obvious than others.

The courts may find you guilty of bad faith if you engage in certain deceitful activities. Such activities are as follows:

  •       You intentionally fail to investigate a claim in a thorough and proper manner.
  •       You delay paying out a claim for an extended period of time.
  •       You deny benefits without giving a sound reason for doing so.
  •       You intentionally use tricky policy language to confuse policy holders.
  •       You simply choose not to settle a case or to issue a refund for a claimant's loss. 

You need to be careful about how long you choose to take to settle a claim, as some states require you to settle within a specific time frame. The courts may also find you guilty of bad faith if you provide policy holders with misleading terms or facts.

The information provided here is for educational purposes only. It is not meant to serve as legal advice.  

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Fowler Bell PLLC
300 West Vine Street, Suite 600
Lexington, KY 40507

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