An insurer's unreasonable denial, delay, or underpayment of a legitimate insurance claim. Insurance companies have a legal duty to act in good faith and deal fairly with policyholders. If an insurer acts in bad faith, the policyholder may sue for damages beyond the original claim amount.
Related Terms
Adjuster
An insurance professional who investigates and evaluates claims on behalf of an insurance company. The adjuster inspects damage, reviews documentation, interviews witnesses, and determines how much the insurer should pay for a covered loss.
Claim
A formal request made by a policyholder to an insurance company for payment or reimbursement for a covered loss or policy event. Filing a claim triggers the insurer to investigate the loss, assess damages, and determine what amount is payable under the policy.
Subrogation
The legal right of an insurer to pursue a third party that caused a loss to recover the amount paid on a claim. For example, if another driver is at fault in a car accident, your insurer may pay your claim and then seek reimbursement from the at-fault driver's insurer.