Bad faith is a separate cause of action against an insurance carrier for unreasonably failing to settle, investigate, or pay a valid claim. It comes up most often when the carrier refuses to pay its own policyholder's claim, or when the carrier refuses to settle within policy limits and exposes its insured to an excess verdict.
Missouri recognizes both first-party and third-party bad faith. Illinois recognizes a statutory bad faith claim under 215 ILCS 5/155 plus common-law claims in some contexts. Both states allow recovery of fees, costs, and in some cases punitive damages.
Bad faith cases are technical. The carrier's claim file, internal communications, and pattern of conduct become discoverable. Pursuing bad faith requires understanding how insurance companies actually operate.