ACE American Lloyds Insurance Company

Bad faith is the unreasonable failure of an insurance company to honor the terms of an insurance policy and deal with a policyholder in good faith. Insurance companies who are found to have acted in bad faith can be liable for punitive damages in addition to contract damages. Some states have bad faith statutes called "Unfair Insurance Claims Practices Acts."

The New York Attorney General's 2004 insurance investigation revealed compelling evidence pointing to the widespread practice of bid rigging and other improper transactions perpetrated by ACE, AIG, and Marsh, among others. ACE avoided a trial by paying a large settlement, agreeing to significantly change its business practices, and the company issued a formal apology to consumers who had been victimized.