Insurance bad faith is a lawsuit brought by one party against another who has violated the covenant of good faith and fair dealing that exists in every contract. The standards of proof differ depending on the status of the Plaintiff. Courts have distinguished between first party claims and third party claims.

First Party Insurance Bad Faith

A first party claim us a claim by an insured against his or her own insurance company. For example, a fire loss claim against your homeowner policy is a first party claim. In most jurisdiction, 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” which automatically exists by operation of law in every insurance contract. If an insurance company violates that covenant, the policyholder may sue the company on a tort claim in addition to a standard breach of contract claim. The contract-tort distinction is significant because as a matter of public policy, punitive or exemplary damages are unavailable for contract claims, but are available for tort claims. The end result is that 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.

Third Party Insurance Bad Faith

A third party insurance bad faith claim is a claim against a policy made by someone other than the named insured. For example, someone who makes a claim for injuries after falling on another party’s land. The person making the claim is not the insures under the policy, the insured is the landowner. Here the injured party is making a claim under the landowner’s policy.

If you have been a victim of insurance bad faith, contact the Charleston lawyers at the Clore Law Group today.