What is the difference between fraud and bad faith in insurance litigation cases?

In an insurance litigation case, it is important to understand the difference between fraud and bad faith. Fraud is an intentional act or omission of material facts that induces an insurance company to issue a policy, accept a claim, or pay a settlement. It is an intentional deception or misrepresentation with the intent to defraud. Examples of fraud include a policyholder providing false medical information to receive a life policy, or submitting a false claim for an auto accident. On the other hand, bad faith is an insurance company’s refusal to honor a valid claim or policy. It is a breach of the insurance contract. It is typically a disregard of the policyholder’s rights or a refusal to fairly assess a claim. Examples of bad faith practices in California include unreasonable delays in handling a claim, a failure to investigate a claim thoroughly, failing to offer a reasonable settlement, or an outright refusal to pay a valid claim. It is important to note that fraud and bad faith are not the same. The former is intentional and deceptive, while the latter is a breach of the insurance contract. Although both fraud and bad faith can lead to insurance litigation, they are distinct legal concepts that should be understood by anyone involved in an insurance dispute.

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What is the difference between fraud and bad faith in insurance litigation cases?

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