Breach Of Contract

An insurance company must, first and foremost, comply with the express terms of the insurance policy. Aside from a few differences, insurance policies are interpreted and enforced by the courts just like any other contract.

Bad Faith

In many states, the insurance company must also comply with the covenant of good faith and fair dealing which the law automatically deems is part of the policy of insurance. Generally stated under Arizona law, an insurer violates the implied covenant when it acts unreasonably in the handling of an insurance claim. One basic requirement is that the insurance company conduct a prompt and thorough investigation. It must only make decisions if it has a reasonable basis and sufficient information to do so. An insurer is required to keep its insureds reasonably informed concerning the status of the claim and the insurer’s investigation. An insurer commits bad faith when it does not treat its customers fairly and honestly and cannot attempt to place unfair financial pressure on its insured. An insurer commits bad faith when it eliminates the insured’s security and peace of mind under the policy, forces an insured to jump over needless adversarial hurdles to obtain benefits under the policy, or low balls claims payments in an effort to get the insured to accept less.

Bad Faith Damages

In a “bad faith” claim insureds are not limited to recovering the amounts due under the policy. In a “bad faith” claim, insureds may also recover damages for emotional distress, inconvenience and aggravation, as well as punitive damages in appropriate cases where it can be shown that the insurance company acted egregiously. Attorneys’ fees may also be recoverable in cases against insurance companies.


This is only a brief basic overview of general insurance law in Arizona. You should not rely on this as being the law applicable to your matter because it requires thorough legal analysis to determine which law applies in any given matter and, if so, how the law applies. The law of other states may or may not be consistent with Arizona law.