Business, Legal & Accounting Glossary
1) n. intentional dishonest act by not fulfilling legal or contractual obligations, misleading another, entering into an agreement without the intention or means to fulfill it, or violating basic standards of honesty in dealing with others. Most states recognize what is called “implied covenant of good faith and fair dealing” which is breached by acts of bad faith, for which a lawsuit may be brought (filed) for the breach (just as one might sue for breach of contract). The question of bad faith may be raised as a defense to a suit on a contract. 2) adj. when there is bad faith then a transaction is called a “bad faith” contract or “bad faith” offer.
Bad faith is an intentional and conscious decision to mislead or deceive someone and fail to follow a duty. It differs from a negligent action because it implies the person made the decision willfully.
In personal injury, bad faith generally refers to a tort claim against an insurance company claiming the insurance company made an unreasonable failure to fully and fairly pay claims promptly. A bad faith claim argues the insurance company breached their duty of care by failing to act in good faith and fair dealing with the persons they insure. This duty is often referred to as the “implied covenant of good faith and fair dealing. Under this tort claim, the person sues the company for breach of contract which may allow punitive or exemplary damages. Punitive damages are often in an amount larger than the original face value of the policy and are used to punish the guilty party and deter future companies or persons from taking the same bad faith actions in the future.
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This glossary post was last updated: 26th April, 2020 | 2 Views.