In Florida, insurers are legally obligated to act in good faith when handling insurance claims. This means they must investigate claims thoroughly, make fair and timely decisions, and pay valid claims promptly. A failure to uphold these duties can give rise to a cause of action where the policyholder alleges the insurer acted improperly. For example, unreasonably denying a legitimate claim without proper investigation, misrepresenting policy provisions to avoid payment, or failing to communicate effectively with the claimant could constitute a breach of this obligation.
The concept is important because it provides policyholders with recourse when insurance companies act unfairly. It ensures that insurers are held accountable for fulfilling their contractual obligations and protects vulnerable individuals and businesses from financial hardship caused by unjust claim denials or delays. Historically, this area of law has evolved to balance the power dynamic between insurers and policyholders, recognizing the potential for abuse and the need for legal remedies to address such misconduct. The existence of these legal protections serves as a deterrent against unethical practices within the insurance industry.
