What Is Bad Faith?

When dealing with personal injury or insurance disputes, the topic of bad faith actions are often raised. This term of art or legal action is often used by parties to a lawsuit but too often there is not a true understanding of the legal basis for a bad faith action. This blog is the first of two parts and addresses the two types of available bad faith actions in Florida.

In general, a bad faith action involves an insurer’s violation of duties that it owes to its’ insured (i.e. the policyholder). Because a bad faith action primarily revolves around insurance companies, there are two types of bad faith scenarios. The first action involves an insurance company’s failure to exercise good faith toward its clients in handling of a third party liability claim against the client. In this instance, the insured party (the insurance client) or the third party claimant can pursue a bad faith action against the insurance company.

The second type of bad faith action involves an insurance company’s failure to exercise good faith when presented with a first party claim from their own client. This type of action is referred to as a first party bad faith action and generally involves some type of property claim such as sinkhole, flood, fire, etc. or a uninsured/underinsured motorist claim following a car accident.

Different remedies are available to the insured party with both types of bad faith actions. The different remedies will be addressed in a subsequent blog which will also include the obligations that an insurance company owes to its insured.