Breach of the Insurer’s Duty of Good Faith

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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