An insurance policy is a promise. That commitment is put to the test when the insurance company is called upon to honor its agreement. In our experience, insurers do not always act in good faith.
When faced with a large claim potentially covered by insurance—whether it is a securities or business interruption claim, or a claim alleging wrongful acts potentially covered under D&O or E&O policies—policyholders must move quickly to provide notice to their insurers, respond to the demand letter or make arrangements to fund any necessary defense, and gather information requested by the insurance companies about the claim. However, an insurance company may have “crossed the line” into bad faith conduct in connection with the claim if it: