There are two types of insurance, bad faith, the first type and the most often used is first-party bad faith.  Every insurance company owes a duty of good faith to its own insureds.  If they breach that duty of good faith, they are in bad faith to their insured.  Bad faith cases can lie in the following areas:

Coverage and Defense

Failure to provide either coverage, or a defense, or both, when a claim is made against you may be a basis for bad faith.  These are two different actions.  Most insurance policies require your insured’s carrier to defend you in a claim that is brought against you and in addition, they require that carrier to pay the damages that are lost up to the policy limit if a verdict or a judgment is rendered against you. The duty to defend is a far easier duty to show the carrier has.  The second duty is to actually pay the damages.  An example may be an intentional action is brought against you in an auto collision or claim for punitive damages brought against you in an auto collision.  Your insurance coverage will pay compensatory damages to the person that is injured, if you were in an accident and caused somebody else damages.  Your insurance carrier is not required to pay your punitive damages if those were awarded against you.  Nonetheless, under that set of circumstances, your insurance carrier does need to provide you a defense for all claims.  They also need to provide you coverage for the covered portions of the claim, that is, the compensatory losses rather than the punitive losses.  If they breach those duties, you have a right to recover your defense costs that you have had to occur to defend yourself and under good faith perhaps punitive damages against your carrier. You are also entitled in Ohio to interest if the insurance carrier fails to provide you a defense. 

Uninsured Motorist

Another example of bad faith would come in an uninsured or underinsured motorist situation where your insurance carrier does not treat you in good faith and fails to provide you a reasonable settlement.  If you have to file suit based on that failure, you can file suit for both the compensatory damages that you have lost, i.e., the monies that were not paid to you as a result of a third person’s negligence that was uninsured.  Your auto insurance carrier under the uninsured motorist provisions of the policy makes the payment you would have received from the wrongdoer.  If they fail in their duties, you may have a bad faith claim against that carrier if, in fact, they failed to evaluate your claim and handle your claim on your behalf in good faith.

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