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What constitutes bad faith in insurance dealings?

On Behalf of | Jul 19, 2021 | Insurance Law |

Insurance companies throughout Las Vegas work hard to ensure that their policy holders are properly compensated when they make valid claims. However, not every claim that is submitted to an insurance company will be sufficient for payment. Insurance companies have it within their power to deny claims that do not meet their requirements.

Upon receiving denials, some policy holders attempt to allege that their insurers have acted in bad faith and should pay out their claims. Bad faith is a significant term in the insurance world because when it is proven it can result in punitive damages assessed against insurance companies. This post will look at what bad faith is and what insurance companies can take to defend against allegations of it.

Examples of bad faith

Insurers should remember that bad faith is not the same as negligence. Negligence implies a failure to meet but duty, whereas bad faith implies an intentional wrongful act. According to the State Bar of Nevada, examples of bad faith can include:

  • Intentionally delaying payments
  • Basing denials on wrongful or false grounds
  • Rebuffing attempts to settle claims
  • Interpreting insurance policies in irrational ways

To this end, when a policy holder alleges that their insurer acted in bad faith, they must be prepared to prove wrongdoing and not just negligence.

Defending claims of bad faith

Claims of bad faith can be difficult for insurance companies to address. Often, delays in policy payments and other communications may cause frustrated policy holders to make rash allegations of bad faith. Insurance companies should be aware that the do not have to respond to claims of bad faith on their own. Insurance defense lawyers are prepared to offer counsel and representation to insurers that are bogged down in bad faith claims and who wish to move beyond their legal troubles so that they may continue to serve their policy holders.


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