Bad Faith Law & Legal Definition


Bad faith refers to dishonesty or fraud in a transaction, such as entering into an agreement with no intention of ever living up to its terms, or knowingly misrepresenting the quality of something that is being bought or sold. It may involve an intent to deceive or mislead another in order to gain some advantage. It is often related to a breach of a the obligation inherent in alll contracts to deal with the other parties in good faith and with fair dealing, such as in paying claims, or issuing a cancellation under an insurance policy. Insurers may be guilty of bad faith for failing to promptly and thoroughly investigate a claim, unreasonably delaying payment, unreasonably denying benefits to a claim, using unreasonable interpretations in translating policy language, or refusing to settle the case or reimburse you for the entirety of your loss, etc. Unless a time period for settling a claim is defined in the policy, a "reasonable time" generally applies, which is a subjective term, depending on the facts and circumstances in each case. Bad faith may also be claimed against a person who files suit solely for purposes of harassment. In this case, the defendant's attorney fees may be awarded if such bad faith motives are proven.