What Is Considered Bad Faith?

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(Newswire.net — October 28, 2020) — Acting in bad faith can occur in many different ways. For example, behaving in an intentionally dishonest way by not fulfilling legal or contractual obligations or misleading someone can be classified as bad faith. Similarly, entering into an agreement without any intention (or perhaps the means) to fulfill it can also be classified as bad faith.

Bad faith generally involves violating accepted standards of honesty while dealing with others. In many states, implied good faith and fair dealing is assumed as a given for different types of transactions and agreements. Breaching this standard by behaving in bad faith can lead to a lawsuit against the party that acted in bad faith.

Bad faith litigation insurance provides us with many examples of how bad faith laws are implemented. Because insurance companies have considerably more expertise, negotiating power, and financial resources at their disposal than their policyholders, insurance companies are required to act in good faith when handling insurance claims. 

An insurance company may be found to have acted in bad faith if it either fails to process, investigate, or pay a claim in a timely and fair manner.

Proving Bad Faith

Proving negligence and liability is a crucial step in successfully filing a personal injury claim. This can be difficult to do if your insurance company acts in bad faith. When it comes to insurance-related issues, successfully proving a claim of bad faith against another party will require that you prove the following.

  1. That benefits that were due as per your policy were withheld. You have to be able to establish that your claim, given the terms and conditions of the contract between you and your insurance provider, is valid.

  2. You must prove that the insurance company was unfair or unreasonable in withholding benefits from you.

Whether or not the insurance company acted reasonably or unreasonably is something that only a judge can decide based on the facts of the case. In some cases, liability can only be established if a claim was intentionally denied without justification. 

Simple negligence or human error on the part of the insurance company or any of its employees may not be enough to win a bad faith legal suit against the insurance company, although you can still pursue damages from them.

Additional Examples of Bad Faith

Insurance isn’t the only industry that can be involved in activities of bad faith. Some examples of bad faith in situations and scenarios beyond those found in the insurance realm include the following:

  • An employer who makes a promise to an employee or a union representative that they do not intend to fulfill
  • A lawyer fighting a case using legal arguments they know to be false
  • A real estate agent (or a seller of any other type) who misrepresents the quality or value of a property or other items to make a sale

If an insurer or any other party is found to have acted in bad faith in some way, they may be held liable for various damages. These include, in the case of insurance companies, the damages stipulated by the policy they failed to properly cover, as well as interest charges, punitive damages for emotional distress, economic losses, legal fees, and more.

When it comes to punitive damages in bad faith cases, they can usually only be levied if it can be proven that the acts that gave rise to a violation occur with such frequency as to indicate a general business practice and these acts are willful, wanton, malicious, and are performed in reckless disregard for the rights of others. These rules are clearly outlined in Florida Statute 624.155.

Bad faith cases are closely monitored by local and federal legal bodies. They are sometimes used to guide the development of laws and legal frameworks that protect the interests of the public.