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Insurer’s Duty of Good Faith

Definition

An insurer has an implied obligation to consider in good faith the interest of the insured within the limits of the insurance policy agreement. This translates to an obligation of the insurer to not withhold unreasonably payments due under a policy. If the insurer breaches this duty of good faith by denying coverage for the insured based on a reasonable claim within the limits of the policy, the insurer is liable for the entire judgment against the insured even if it exceeds the insurance policy’s limits. The obligation of the insurer to act in good faith is absolute and is thus independent of the conduct of the insured.

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