https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3ADuty_of_good_faith_and_fair_dealing 2026-05-05T05:29:50Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Duty_of_good_faith_and_fair_dealing&diff=8936&oldid=prev 2026-03-11T04:47:07Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>⚖️ &#039;&#039;&#039;Duty of good faith and fair dealing&#039;&#039;&#039; is the implied contractual obligation — recognized across most U.S. jurisdictions — that both parties to an [[Definition:Insurance contract | insurance contract]] will act honestly and refrain from doing anything to deprive the other of the benefits the agreement was intended to provide. In insurance, this duty primarily governs the [[Definition:Insurer | insurer&#039;s]] conduct during [[Definition:Claims management | claims handling]], [[Definition:Policy | policy]] administration, and [[Definition:Claim settlement | settlement]] negotiations, serving as the legal backbone for [[Definition:Bad faith | bad-faith]] causes of action when carriers unreasonably deny, delay, or underpay legitimate [[Definition:Claim | claims]].<br /> <br /> 🔎 While closely related to the broader [[Definition:Duty of good faith | duty of good faith]], the duty of good faith and fair dealing has a distinctly American statutory and common-law character. Many states codify it through [[Definition:Unfair claims settlement practices act | unfair claims settlement practices acts]], which enumerate specific prohibited behaviors — such as failing to acknowledge a claim promptly, refusing to explain a denial in writing, or compelling [[Definition:Claimant | claimants]] to litigate by offering substantially less than the amounts due. Breach of this duty can expose an insurer not only to the original [[Definition:Coverage | covered]] loss but also to consequential damages, emotional-distress awards, and in egregious cases, [[Definition:Punitive damages | punitive damages]]. [[Definition:Insurance regulator | Regulators]] reinforce these expectations through [[Definition:Market conduct examination | market conduct examinations]] and enforcement actions.<br /> <br /> 💼 For carriers and [[Definition:Managing general agent (MGA) | MGAs]], internalizing this duty goes well beyond legal compliance — it shapes [[Definition:Claims adjuster | adjuster]] training, [[Definition:Automation | automated]] decision workflows, and vendor oversight. Insurtech-enabled [[Definition:Claims management | claims operations]] must be designed so that speed and efficiency do not sacrifice fairness; an algorithm that systematically undervalues certain losses can trigger the same liability as a human adjuster acting in bad faith. Organizations that treat the duty of good faith and fair dealing as a design principle rather than a litigation risk tend to build stronger reputations, lower [[Definition:Loss adjustment expense (LAE) | loss adjustment expenses]] over time, and cultivate more durable relationships with [[Definition:Policyholder | policyholders]] and distribution partners.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Bad faith]]<br /> * [[Definition:Duty of good faith]]<br /> * [[Definition:Unfair claims settlement practices act]]<br /> * [[Definition:Punitive damages]]<br /> * [[Definition:Claims management]]<br /> * [[Definition:Market conduct examination]]<br /> {{Div col end}}</div>

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