Question

Explain the consequences faced by an insurance company if they are accused of acting in bad faith.

Answer 1

Bad faith insurance will be all such tactics which is applied by the insurance companies to avoid their contractual obligation to the policyholders and these will be including misrepresentation of the contract term and languages and non disclosure of the policy provisions along with the exclusions are the terms to avoid paying claims.

States have enacted laws to protect consumers from insurance companies bad faith actions and there will be a specifically addressing bad face practices as unfair claim practices and they are meant to protect consumers and malicious behaviour by the insurance companies.

these laws will be requiring the insurance company's acting in bad faith to pay the basic damages to compensate the victim for having a claim denied and they will be above and beyond the amount which has been owed under the claim and this compensation will be covering not only the out of the pocket expenses or borrowed fund but they will also be including missed work and attorney fees.

if the insurance company will be acting particularly egregariously the jury will be awarding punitive damages to the policyholders to punish the insurance companies for the wrongdoing and acting in the bad faith.