In How to Avoid Charges of Bad Faith, insurance expert witness Barry Zalma writes:
Almost every lawsuit filed against an insurance company, especially when a claim is denied, alleges that the insurer acted in bad faith. In the first party context, bad faith claims typically allege that the insurer did not have a reasonable basis to deny coverage, and that the insurer engaged in unfair or deceptive conduct in the process of handling the claim and reaching its conclusions regarding coverage. In the third party context, there is typically an allegation that the insurer failed to timely settle a claim in which liability had become reasonably clear. Insurers, with unfounded courage, deny claims based on the recommendations of a claims handler whose experience may be, and usually is, limited.