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

In the context of insurance law in Washington, the term “bad faith” refers to the unfair or deceptive tactics used by insurance companies during the dispute process. Bad faith tactics can include failing to properly investigate a claim, attempting to deny or delay payment of a claim without good cause, and/or using any means of harassment or coercion when dealing with a claimant. When an insurance company engages in bad faith behavior, the insured (the person making the claim) may be able to recover damages from the insurer. The concept of bad faith is rooted in the fiduciary duty of an insurer to act in the best interest of its insureds. Under this duty, insurance companies are required to act in good faith when dealing with a claim. This means they must thoroughly investigate the claim and be honest, transparent, and fair when communicating with the claimant. If they fail to meet these high standards, they may be liable for bad faith. Bad faith claims can be difficult to prove, however. To win a bad faith dispute the claimant must be able to demonstrate that the insurer acted unreasonably and without good cause. The claimant may also need to show that the insurer had knowledge of the facts in the case, but still engaged in bad faith practices. If successful in a bad faith action, the claimant may be able to recover damages such as emotional distress, attorney fees, and punitive damages.

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

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