What does the term “bad faith” mean in an insurance dispute?

The term “bad faith” is used in insurance disputes to describe situations where an insurance company refuses to honor a valid claim. In Minnesota, the law requires that insurance companies act in good faith when dealing with policyholders. That means they must act fairly and honestly when dealing with claims. When an insurance company denies an otherwise valid claim, or delays payment of the claim longer than necessary, it may be acting in bad faith. This is considered to be a breach of the insurance company’s fiduciary duty to their policyholders. If an insurance company is found to have acted in bad faith, policyholders may be entitled to additional compensation. This compensation could include punitive damages, which are intended to discourage insurance companies from engaging in unfair or deceptive acts. It could also include the payment of the claim, plus any additional expenses incurred as a result of the bad faith act. Insurance bad faith is taken seriously in Minnesota. The law requires insurance companies to act fairly and honestly toward their policyholders, and to refrain from engaging in any unfair or deceptive acts. Policyholders who feel that they have been wronged by their insurance company can take legal action in order to protect their rights.

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What does the term “bad faith” mean in an insurance dispute?

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