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Breach of the Insurer’s Duty of Good Faith

Definition

An independent tort cause of action applicable to circumstances where an insurer has used bad faith in handling a policyholder’s claim. When the insured demonstrates more than merely a denial of benefits promised under a policy of insurance, but instead, that the insurer’s denial of the claim was deliberately made in bad faith, with knowledge of the lack of a reasonable basis for the denial, the insured may be entitled to compensatory tort damages. This tort cause of action is recognized by a majority, but not all, of states.

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