What is an insurance company’s duty to act in good faith?

In California, an insurance company’s duty to act in good faith means to act in a manner that is fair and honest. It means that the company must take reasonable steps to investigate and verify the facts, and to determine you, the policyholder’s, rights and obligations under the policy. It requires an insurance company to act in a manner that is not oppressive or unreasonable when settling a claim. In addition, an insurance company must not refuse to pay a claim without making a good faith effort to investigate and determine the facts, or to act with reasonable promptness. The good faith duty requires an insurance company to deal fairly and in good faith with you, the policyholder. They must act reasonably and promptly when investigating any claim you have made under your policy. Good faith duties also mean that the insurance company must pay valid claims in a timely manner. The insurance company must also explain the reasons if they deny or dispute your claim. They must provide you with the details of their decision and an explanation of the basis for their decision. When you make a claim for insurance proceeds, the insurance company must investigate and process the claim with reasonable promptness. If the insurance company does not act in good faith, you may be able to take legal action against them for bad faith breach of contract.

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What is an insurance company’s duty to act in good faith?

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