Bad faith occurs when the insurance company fails to investigate, properly evaluate, or promptly pay a claim. One of the hallmarks of a bad faith claim is that there has been an unreasonable delay.
Adam has pursued bad faith cases against a number of insurance companies. With the rise of computer assisted claims adjusting, there appears to be no end to bad faith claims or litigation.
Bad faith insurance can be broken down into two groups: First-party bad faith (claims made by policy holders) and third-party bad faith (claims made against policy holders). In the first type, insurance claims involve improper claim processing, inadequate claim investigation, a delay in payment, or unreasonable denial. The latter involves failure to defend or failure to settle.
If an insured holding person's home is damaged because of a broken pipe, the insurance company must fully investigate the claim. Even if the company believes another party, such as a Home Owner's Association, is responsible for taking care of the claim, it must still do an investigation.
Suppose an insured person is injured in an automobile accident caused by another person. The insurance company of the person at fault must fairly and timely compensate the injured person. If the company fails to do so, bad faith insurance can be claimed.