Institutional bad faith targets company-level conduct: claim handling guidelines, performance metrics, compensation structures, and training that systematically produce unreasonable outcomes.
Proof typically requires discovery beyond the individual claim file into corporate practices and other claims.
Alternative Names:
Systemic Bad Faith, Pattern and Practice Bad Faith
Why it Matters?
This theory is what opens discovery into a carrier's operations, including guidelines, training materials, adjuster performance metrics, and comparable claim files. Courts differ substantially on how much of that discovery to permit, and the fight over scope frequently exceeds the underlying claim in cost. For carriers the practical implication is that internal materials tying adjuster evaluation to closure speed or reserve conservation become exhibits.
Frequently Confused with
Related terms
Frequently asked questions
What discovery does an institutional theory open?
How do courts limit this discovery?
