Good faith in insurance claims
In plain English: good faith is the legal duty to deal honestly and fairly. In insurance, it means an insurer has to investigate your claim properly, explain its decisions, pay what it owes without needless delay and not put its own interests unfairly ahead of yours. It runs both ways: you owe the insurer honesty too.
What the duty looks like day to day
Good faith is not a promise that the insurer will agree with you. An adjuster can dispute your injuries, question the value of your car or argue about fault. What they can't do is deal with you dishonestly or unreasonably. In practice that usually means:
- Acknowledging and investigating the claim within a reasonable time
- Looking at the evidence you send, not just the evidence that helps them
- Explaining a denial or a low offer in writing, with reasons tied to the policy
- Not misstating what your policy covers
- Paying the undisputed part of a claim rather than holding everything back to pressure you in a dispute
Your own policy vs the other driver's insurer
The duty is strongest between an insurer and its own customer. If you claim on your own policy (collision, PIP, uninsured motorist cover), your insurer owes you good faith directly. If you claim against the at-fault driver's insurer, that insurer's main duty is to its own policyholder, not to you. In many US states, it still has to follow fair claims-handling rules, and it must treat a reasonable offer to settle within its customer's limits seriously, or it may end up liable for more than the policy limit.
How it differs by country
US: most states have unfair claims settlement practices laws, and many allow a policyholder to sue for "bad faith" when an insurer acts unreasonably. Remedies range from interest and fees to damages beyond the policy, depending on the state.
UK: the Financial Conduct Authority requires insurers to handle claims promptly and fairly. If you're unhappy, you complain to the insurer first, then to the Financial Ombudsman Service, which is free to use.
Canada: courts recognise a duty of good faith owed by insurers to their policyholders, and in serious cases have awarded extra damages against insurers that behaved badly. Provincial insurance regulators and ombudsman services also handle complaints.
Your insurer accepts that you're owed physiotherapy costs under your policy but refuses to pay anything until you agree to a lower figure for lost wages. Holding back money it already accepts it owes, to pressure you on a separate item, is the kind of conduct that can breach good faith.
What to do if you think it's being broken
- Put your concerns in writing and ask for the reasons behind the decision.
- Keep a dated log of every call, letter and missed deadline.
- Use the insurer's formal complaints process, then the regulator or ombudsman.
- Talk to a lawyer if significant money is at stake. Bad faith claims are technical and vary a lot by state and province.
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General information, not legal or medical advice. Rules differ between US states, the UK and Canadian provinces, so check the law where your accident happened. How we write and check · Legal disclaimer