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Last Modified: December 28, 2022

In Bad Faith

“Generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a 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” (Black’s Law Dictionary). “The intentional refusal to fulfill a legal or contractual obligation, misleading another, or entering into an agreement without intending to or having the means to complete it. Most contracts come with an implied promise to act in good faith” (Nolo’s Law Dictionary). “A term that generally describes dishonest dealing.  Depending on the exact setting, bad faith may mean a dishonest belief or purpose, untrustworthy performance of duties, neglect of fair dealing standards, or a fraudulent intent” (Cornell Law School)

Example Sentence

After being ignored and refused help by their insurance company, the Smiths filed a bad faith claim against the company for failing to fulfill their obligation to pay their property damage expenses.

Case Study

In an actual Utah Supreme Court case Green v. Louder, a bad faith claim is made. Green had been injured in an accident while driving with her mother. She settled with her mom’s insurance company, but then sought to cover more of her medical expenses by applying for her underinsured coverage through State Farm. They refused to cover it because they claimed that Green was not supposed to settle with her mom until she had gotten approval from them. Green then filed a bad faith claim against State Farm “for failing to settle her claims.” In another Supreme Court case, Campbell v. State Farm, a bad faith claim was upheld. Mr. Campbell caused a serious car accident that injured one and killed another. His insurance company, State Farm, refused to settle and took the case to trial. They lost and were ordered to pay millions in damages. State Farm at first refused, instead telling him that he should sell his house to pay these expenses. State Farm ended up paying the amount, but the “Campbells sued for bad faith.” They were compensated for the economic, physical, and emotional damages they sustained as a result of State Farm’s actions.

Other Important Information

If one of the parties in a case calls for a de novo process (meaning that the case will be heard again without reference to the previous rulings) and is then later found to have abused this process, then legal fees can be awarded to the other party to pay for the expenses of a needless extra hearing (Utah Code). If you use an arbitration for UM or UIM claims, then you will not be able to make an allegation about “bad faith liability” (Utah Code). Click here for some examples of in bad faith.