Posted On: March 18, 2007, 5:24 pm CDT

Posted By: real / CLASS

The word "Faith" is ingrained in American society and the American way of life. It is the bastion of religious belief as well as the trust that allows us to achieve a comfort level to deal with others in our every day lives. So too is this "faith" ingrained in the very fiber of a contractual relationship between parties. The Restatement of Contracts 2nd speaks of the basic premise upon which all contracts are based as the concept of "Good Faith and Fair Dealing" which is assumed in the performance of contractual obligations and provisions.

It is then no surprise that this very same premise is presumed in the performance of the Disability Insurance Company's obligations and commitments under the terms of its contract with its insured. Most states, understanding the extreme importance of an Insurance Company's performance, at a time when its insured is most vulnerable, have legislatively mandated laws intended to enforce an insurance company's commitments. They have enacted State Insurance Bad Faith Statutes for this purpose. These laws/causes of action are provided for the insured that is harmed by, or the victim of, the carriers' acting in "Bad Faith" when handling its insured's claim under his/her policy of insurance.

What Is Bad Faith, Anyway?

Black's Law Dictionary defines bad faith as, "the opposite of good faith, generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive."