As there is not a specific formula for what constitutes insurer good faith, insurer bad faith may also take many forms. While policyholders are sometimes familiar with the quintessential bad faith fact pattern – a liability insurer's failure to settle within policy limits – the New York Appellate Division recently issued a timely reminder that an insurer's obligation to handle claims in good faith reaches far beyond the settlement context.

As a general rule, insurance companies must place their own interests on equal footing with the interests of their insureds every step of the way. Neither a disagreement with the insured, nor the commencement of coverage litigation alters this fundamental duty of good faith and fair dealing that accompanies every insurance policy.

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