What constitutes 'bad faith' claims handling by an insurer or adjuster?

Bad faith refers to an insurer's or adjuster's unreasonable or unfair conduct in handling a claim, breaching the implied duty of good faith and fair dealing owed to the insured. Examples include denying a valid claim without a reasonable basis, unreasonably delaying investigation or payment, failing to conduct a proper investigation, misrepresenting policy provisions, or making lowball offers not supported by the facts. Bad-faith conduct can expose the insurer to damages beyond the policy limits, including in some cases punitive damages. Proper, prompt, fair, and well-documented claims handling avoids bad faith. Understanding what constitutes bad faith is critical content for the adjuster exam.