The Good Faith vs Bad Faith Line: What It Means for You

Why this matters

Contractors hear the phrase "bad faith" thrown around by frustrated homeowners and sometimes throw it around themselves when an adjuster lowballs a scope, and it gets used far more loosely than the legal standard actually supports. Knowing roughly where the line sits protects you two ways: it keeps you from making a legal accusation you cannot back up and should not be making anyway, and it helps you recognize the rare situation that genuinely warrants pointing a homeowner toward an attorney instead of just continuing to negotiate.

What "good faith" actually means in this context

Insurance carriers have a legal duty, generally described as the duty of good faith and fair dealing, to handle claims honestly, investigate them reasonably, and pay what the policy actually owes without unreasonable delay or unjustified denial. A carrier that disagrees with your scope, applies its own pricing database, pushes back on a supplement, or takes the full time allowed by its own process is not violating this duty just because the outcome is lower than you wanted. Disagreement is not bad faith. Negotiation is not bad faith. A conservative initial estimate is not bad faith. Most claim friction lives entirely inside the normal, lawful range of how carriers do business.

What starts to look like bad faith

Bad faith is generally about the carrier's conduct and process, not the number it lands on. Patterns that state insurance regulators and courts have historically treated as potential indicators include things like:

• Denying a claim without a reasonable investigation or without ever inspecting the loss.
• Repeated, unexplained delay well beyond normal processing timelines, especially after the policyholder has supplied everything requested.
• A pattern of lowballing that ignores clear, well-documented evidence submitted by the contractor or the policyholder, with no reasonable explanation for the gap.
• Misrepresenting the policy's actual terms to the policyholder to justify a denial or a reduced payout.
• Failing to communicate a clear reason for a denial or a reduced settlement when asked directly.

Notice that every item on this list is about how the carrier behaved, not simply that they offered less than the contractor thinks is fair. A low number with a clear rationale, backed by their own documentation, is a negotiating position. A low number with no rationale, repeated stonewalling, and no willingness to explain itself starts to look like a process problem.

This is not your legal call to make

This distinction matters for a specific practical reason: you are not a lawyer, you have not reviewed the full claim file or the policy language, and asserting "this is bad faith" to a homeowner sets an expectation you cannot deliver on and exposes you to giving legal advice you are not qualified to give. Your role is narrower and still useful:

• Document the facts plainly, without the label. "We submitted this evidence on this date and received no response for three weeks" is a fact. "That's bad faith" is a legal conclusion.
• Point toward the right resource when the pattern looks concerning: the state insurance department for a complaint about claim-handling conduct, or an attorney or public adjuster for anything that might rise to an actual bad-faith claim. Let them make the assessment.
• Keep negotiating on the technical merits in parallel. Most stalled or disputed claims resolve through better documentation and persistence, not through a legal escalation.

Why this matters for your own conduct too

The good-faith standard is not only something carriers owe. Your own documentation, your own scope, and your own representations to the adjuster carry the same expectation of honesty. Inflating a quantity, characterizing pre-existing wear as storm damage, or pressuring a homeowner to sign off on work that does not match what you actually found undermines your own credibility and can expose you to the same kind of scrutiny you would otherwise be pointing at a carrier. The standard cuts both ways, and adjusters who work claims regularly can tell the difference between a contractor who documents honestly and one who does not.

The practical takeaway

Most of what frustrates contractors in a claim negotiation, a conservative first number, a slow process, a firm pushback on a line item, sits comfortably inside normal, lawful claims handling. Reserve the phrase "bad faith" for what it actually describes: a pattern of unreasonable process, not a disagreement about price. When you see that pattern, document the facts and route the homeowner to the right professional rather than making the determination yourself.

References

• National Association of Insurance Commissioners (NAIC), unfair claims settlement practices model act
• State insurance department consumer guidance on bad-faith claims (standards vary by state; confirm locally or via an attorney)
• See related: Adjuster Won't Return Calls Decision Tree, The Claim Was Denied: Now What Decision Tree