Insurance companies are expected to do the right thing. In cases when they do not, their insured customers are permitted to sue on basis of a tort claim and a standard breach of contract claim. While a breach of contract claim does not allow punitive or exemplary damages, a tort claim does. In many instances, damages in excess of what the policy would have otherwise covered may be awarded especially if the insurance company’s conduct was erroneous or an example of bad faith.
Examples of bad faith:
Undue delay in handling claims
Inadequate investigation
Refusal to defend a lawsuit
Threats against an insured
Refusing to make a reasonable settlement offer
Making unreasonable interpretations of an insurance policy.
