If a claim handler suspects potential bad faith, what is the recommended course of action?

• A. Immediately deny the claim and discontinue investigation.
• B. Ignore the indicators to avoid escalation.
• C. Escalate per policy, document actions, and involve counsel when needed.
• D. Publicly announce the suspicion to the insured.

Answer: (C)

When there are signs of potential bad faith, the proper approach is to follow the established escalation process, document every action and indicator, and bring in counsel when needed. This keeps the handling of the claim within policy guidelines, ensures decisions are supported by evidence, and provides legal oversight to mitigate risk. Dismissing the claim immediately or halting the investigation without a thorough review ignores the need to verify facts and can expose the claims process to bad-faith accusations. Ignoring indicators to avoid escalation undermines responsibility and can damage the insured and the insurer. Publicly announcing the suspicion to the insured is inappropriate and could compromise confidentiality and the integrity of the process.