Why do Insurers commit bad faith?
There is a very substantial benefit and good economic reason for Insurers to commit bad faith. Insurers receive thousands of claims every day many of which are wrongfully denied. Because very few Insureds dispute wrongful denials of claims or coverage, insurance companies save significant amounts that they are obligated to pay under the terms of the policy. Consider the following example. Assume that an Insurer denies 100 claims that they actually should pay based upon the language of the insurance contract and that ninety of these claims go unchallenged. Also assume that the remaining ten consumers retain attorneys who challenge the denials and, of these ten, the Insurer reverses its earlier decision to deny coverage and agrees to pay nine of these claims. The tenth claimant then files a lawsuit to recover bad faith damages against the Insurer. Even if this claimant who filed suit recovers damages against the Insurer, the insurance company would still likely have saved millions of dol
