What is bad faith?

You pay your premiums to your insurance provider in Shelby every month with the expectation that should the time come the you need coverage, it would be automatic. This assumption seems to fly in the face of the age-old adage that insurers do not stay in business by paying on claims. Yours may indeed look for reasons to deny you coverage. While denials are permissible, they cannot be based off bad faith. 

What is bad faith? A legal concept exists known as "the implied covenant of good faith and fair dealing." Per the Cornell University Law School, this obliges parties to a contract to operate honestly and openly with each other, while avoiding the misrepresentation of facts, breaking predetermined agreements or using deceit to avoid fulfilling obligations. What this means is that while your insurer can look for legitimate reasons to deny your claim, in cannot employ bad faith tactics such as purposely delaying decisions, pushing you to settle for a lesser amount, making threatening or misleading statements, or simply refusing to pay on a valid claim. 

You might think the word "implied" offers a lot of leeway in interpreting what duties your insurers has towards you. However, rulings issued by Tennessee courts have established the standard needed to be met in order to prove insurance bad faith. The criteria are as follows: 

  • Your policy must have come due and payable
  • You must have made a formal demand for payment
  • 60 must have passed in which no payment was made before initiating action
  • The refusal to pay must not have been in good faith

The advantage that you have is that good faith is not an obligation set by a contract, but rather a standard the law forces your insurance provider to adhere to. 

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