Insurance companies have a duty to treat their policyholders fairly and justly under the terms of that policy. This does not mean that they never make mistakes. Errors can and do happen, and they may need to be rectified.
It becomes a problem, though, when the insurance company intentionally acts in bad faith. In some way, they are trying to get out of their contractual obligation. This is more than just an error or an oversight. It can cause significant harm to the policyholder, who then may need to take legal action.
What would this look like?
There are many different ways that this can happen. For instance, if the insurance company simply ignores your attempts to contact them or creates unreasonable delays, they may be acting in bad faith. They are hoping that the process will be too difficult for you so that you will drop your claim.
Another issue could be if they misrepresent the terms of the contract. Perhaps it is very clear that they owe you a settlement, but they pretend that the contract says something that would disqualify you from those payouts. They may just try to make the process confusing, using legalese and complex descriptions of the terms that are not accurate.
Failure to pay can also be a significant issue. Perhaps the insurance company does communicate with you at the beginning of the process, but after the payout is calculated, you never receive your check, and you do not hear anything else. This could be an example of bad faith if they are intentionally withholding the payment.
What options do you have?
If something like this happens to you, it can be very frustrating. The key is to remember that you do have legal options, so it is time to look into all the steps you can take moving forward.