FAQ: What is a Bad-Faith Claim?

An assertion that one engaged in an intentionally dishonest act of not fulfilling legal or contractual obligations, mislead another person, entered into an agreement without any intention or means of fulfilling it, or violated basic standards of honest behavior.

Bad-Faith Claims are most commonly applied against insurance companies, which have a duty to deal fairly and in good faith with an insured party in the processing of claims, according to the State of Texas. To prove an insurance Bad-Faith Claim, the insured must prove two things:

  1. There was no reasonable basis for denying or delaying the payment of a claim.
  2. The insurance company knew, or should have known, that there was no such reasonable basis.