Sometimes I am forced to deliver the news to an insured that a bad faith claim may not apply in the insured’s case. Usually, the response is disbelief and confusion. After all, why wouldn’t bad faith apply if an insurer didn’t properly pay a legitimate claim or if an insurer is delaying a claim? When evaluating property insurance cases, we must always consider the insured’s actions as well as the insurer’s. An insured’s actions throughout a claim may also allow an insurer to raise affirmative defenses that can defeat a bad faith action.

An act by the insured that is considered a breach of the policy provisions may create a defense for the insurer. Insureds are expected to be forthcoming and under the cooperation clause and other similar terms of an insurance policy and are obligated to cooperate with the insurer’s investigation. An insured’s misconduct may actually show the insurer acted reasonably under the circumstances.

When looking at how an insurer may use an insured’s actions to disprove a claim that the insurer acted in bad faith, an insurer might assert that:

  1. An insured made unreasonable settlement offers such as requiring acceptance within 24;
  2. the insured colluded with their representatives to set up the insurer with a bad faith action;
  3. the insured’s statements to insurer were false or misleading; or
  4. the insured and its representatives made a demand without providing all the pertinent facts for the insurer to evaluate the claim.

Not every case or claim is adjusted in bad faith, and insureds and their representatives should always remember their actions will be considered in any bad faith determination.