A term describing blatantly unfair conduct that exceeds mere negligence by an insurance company. For example, a bad faith claim may arise if an auto liability insurer arbitrarily refuses to settle a claim within policy limits, where an insured's liability is incontrovertible. Bad faith damages, also known as extracontractual damages, are often substantial. They frequently exceed the limits of the insurance policy that is the subject of the claim.

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See reference to Bad Faith in "Professional Liability Insurance Litigation i the 1990s" below.

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