Bad Faith Claims

Bad faith claims arise in two different contexts, each of which is discussed separately below: (1) First-party claims; and (2) Third-party claims.

First-party claims are typically brought by the policyholder (the “first-party”) against the insurer for allegedly wrongful conduct exhibited by the insurer in the adjustment and handling of the insured’s claim under a fire, property, health, disability or life insurance policy. These claims involve the duties owed by the insurer to its policyholder in connection with the adjustment of the claim. Typically, the insurer denies all or part of an insured’s claim and the insured sues the insurer for contractual and extra-contractual damages.

Third-party claims involve conduct on the part of the insurer in the handling of a “third-party” claim (i.e. a claim brought by a party other than the insured). These claims involve situations in which the insured is sued for tort damages arising from an accident, which triggers coverage to the insured under a liability insurance policy. Third-party claims involve conduct on the part of the insurer regarding the investigation, defense, handling and settlement of a claim brought by the third-party against the insured, and the protection of the rights of the insured in the process. In these types of claims, the insured is held liable to the third-party for amounts in excess of the liability policy coverage limits. These cases focus upon the insurer’s control of the defense of the litigation and the decisions that it makes in that regard.