How to prevent bad faith and defend against it

On Behalf of McNabb, Bragorgos, Burgess & Sorin, PLLC | Sep 21, 2022 | Insurance Law

The accusation of bad faith can easily leave a stain of mistrust on a Tennessee insurance company, particularly when it’s poorly defended. If your company is facing such an issue, it’s advisable that you take action and carry forward with the next steps to ensure that you’re fully protected.

What causes bad faith?
Your risk of exposure to bad faith is broken down into four main categories. To reduce that exposure, you’ll need to explore each of these areas and ensure that the necessary actions have been taken at each step. Those areas are:

• Coverage confirmation
• Investigation
• Evaluation
• Settlement initiation
• No matter what the claim is, coverage has to be confirmed first. Those who are familiar with handling a claim will recognize this step.

But with bad faith, it’s also important to have a strong follow-up because these next steps may have just as much or more of a bearing on the outcome. A major part of that process includes reviewing the coverages, which includes making an assessment about whether or not the court would think that the claim may be covered. When that is the case, it’s required that a defense be provided.

Stopping bad faith in its tracks
The best defense against bad faith is avoiding it in the first place. If you’re able to prevent it from ever happening at all, you won’t have to deal with the legal repercussions that may follow.

Unfortunately, that’s not always possible – and hindsight is often 20/20. That’s what makes it so crucial to learn what to watch out for. Pay attention to these key areas and it may significantly lower the chance of bad faith ever happening in your insurance business practices.