There is no checklist or other steps that will fully insulate an insurer from liability for a bad faith claim. However, certain things can be done when a demand is presented to put the insurer in the best position possible to address such a claim down the road. (Credit: Andrey_Popov/Shutterstock.com) There is no checklist or other steps that will fully insulate an insurer from liability for a bad faith claim. However, certain things can be done when a demand is presented to put the insurer in the best position possible to address such a claim down the road. (Credit: Andrey_Popov/Shutterstock.com)

A bad faith claim in many states is typically preceded by a time-limited demand to settle the claim within the available policy limit. Navigating this type of policy-limit demand can be difficult, and, in recent years, insurance companies have seen a rise in time-limited demands amounting to "bad faith set-ups." Bad faith set-ups attempt to trip up insurers' responses to time-limited demands to create possible extra-contractual liability.

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