What does an insurance bad faith claim involve?

An insurance bad faith claim involves allegations that an insurer has failed to fulfill contractual obligations. This typically means that the insurer has not acted in good faith when handling a claim made by a policyholder. Good faith requires that the insurer treats its clients fairly, honestly, and adheres to the terms of the insurance contract. Bad faith claims can arise when an insurer unreasonably denies a claim, delays payment without just cause, or fails to investigate a claim adequately.

In contrast, disputes over premium rates, claims for underinsurance in a natural disaster, and conflicts regarding policy exclusions do not directly pertain to the concept of bad faith. These situations may involve misunderstandings or disagreements about the terms of the insurance policy but do not necessarily implicate unethical or unreasonable behavior by the insurer as required for a bad faith claim.