Requirements for showing ‘Good Faith’

When it comes to the disaster restoration industry, there are two major ways insurance factors in:
claims by property owners on property insurance, and
contracts on general liability.
In many cases, an insurance company will be in a more powerful position than the insured who has made a claim, according to Ian J. Houston, partner at Borden Ladner Gervais, who was scheduled to speak about Bad Faith claims on June 20 at the Disaster Restoration Contractor’s Conference & Trade Show in Toronto.
The duty of good faith is the laws way of ensuring that insurance companies do not take unfair advantage of the insured during the claims process.
In his speaking notes, Gervais noted that the duty of good faith requires the following from an insurer:
To act in a timely manner, including paying in a timely manner
To deal with the claim fairly, in investigation, assessment and decision
In regards to third-party insurance, a claim should be settled against the insured when it is reasonable; acting as an ordinarily prudent insurer.
From the insured the following are required:
All relevant information must be disclosed at the onset of the insurance policy
Losses must be reported in a timely fashion
Must be honest at all times
If an insurer fails to observe the duties of good faith then they can face punitive damages, according to Houston. This can occur when bad faith occurs for an extended period of time and when profit occurs from the misconduct, among other reasons.
The amount of the award may vary depending on a number of factors including intent, profit, concealment of misconduct and so forth.
If the insured acts in bad faith, then the policy is vitiated, Houston noted.