What is an insurer's duty of good faith?

In California, an insurer’s duty of good faith is a legal obligation to act fairly and in an honest and reasonable manner when dealing with policyholders and claimants. This means an insurer is obligated to handle claims promptly and in a transparent way and to not unreasonably deny or delay payment of policy benefits. For example, an insurer must act in good faith when reviewing and making decisions on claims. This includes thoroughly investigating, assessing, and evaluating all claims, in order to determine if the claim is covered under the policy. If a claim is found to be valid, the insurer must pay the policyholder or claimant in a timely manner. Additionally, an insurer must provide the policyholder with all the information they need to understand the terms of the policy and their rights. They must also address any questions or concerns the policyholder has accurately and promptly. When an insurer fails to act in good faith in any of these ways, they may be found liable for bad faith in court. This means the policyholder or claimant may be entitled to additional reimbursement or damages. Ultimately, an insurer’s duty of good faith ensures that policyholders are fairly and honestly treated when it comes to insurance claims.

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What is an insurer's duty of good faith?

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