The term “bad faith” is one of the most disparaging terms risk managers can level against their insurers. Bad-faith allegations are made after a claim has been poorly handled in the eyes of the risk manager, with a lawsuit often following.
Successfully proving a bad-faith allegation requires proof of more than mere negligence. The insurer must have knowingly acted in an unreasonable manner.
The damages facing an insurer found guilty of bad-faith dealings are more than financial. The insurer's reputation also can be seriously damaged.
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