When you buy an insurance policy, you sign a contract. You are expected to uphold your side of the contract, and the insurance company is expected to uphold theirs. Both of you have this obligation.
When people claim that an insurance company is operating in bad faith, they are saying that the company is violating that contract. They are not upholding their end of the deal.
But this doesn’t mean that every mistake made by the insurance company indicates bad faith. There’s more to it than just an error.
What does bad faith look like?
For example, say that the insurance adjuster simply reads the documentation incorrectly and makes a mistake, telling you that you are not covered after a natural disaster damages your home. But they rectify that mistake after realizing that they have made an error. This is much different than intentionally misrepresenting the policy to you – or telling you that you are not covered for the damages when the adjuster knows full well that you are.
Another example could be if the insurance company fails to properly investigate your claim. If they are just creating unreasonable delays or ignoring your claim, they may be operating in bad faith. But it could also be something like a miscommunication error. Perhaps the person assigned to investigate the case was never aware of it, so the investigation goes overlooked until the error is discovered.
In other words, these cases can get very complicated and you and the insurance company may have a very different perspective on what happened. If there is a dispute or a lawsuit, be sure you know about all of your legal options.
