Which of the following is considered a potential act of bad faith?

Deliberate misinterpretation of policy language is considered a potential act of bad faith because it involves intentionally misleading the policyholder about the terms and conditions of their insurance policy. Bad faith actions undermine the trust that is essential to the insurer-insured relationship. Insurers are obligated to provide accurate, clear, and honest information about policy language to ensure that policyholders understand their rights and obligations. Misleading clients, especially regarding their policy coverage, can lead to wrongful denial of claims and has serious ethical and legal implications.

In contrast, timely claims resolution, providing additional coverage options, and consistent communication with policyholders are all actions that reflect good faith behavior by insurers. They illustrate a commitment to serving clients’ needs, ensuring clarity on policy terms, and fostering positive relationships with policyholders. These actions contribute to a trustworthy environment and build the policyholder's confidence in the insurance process.