Bad Faith Under Insurance Law and Legal Definition

Insurance Bad Faith is a legal term that describes a tort claim that an insured person may have against an insurance company for its bad acts. Insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the implied covenant of good faith and fair dealing. This exists by operation of law in every insurance contract. If an insurance company violates that covenant, the insured person insured may have a claim for "bad faith." A plaintiff in an insurance bad faith case may be able to recover an amount larger than the original face value of the policy if the insurance company's conduct was particularly egregious.