Insurance companies in Massachusetts as well as in other states are required to evaluate and process claims "reasonably." If it is found by a court that an insurance company has acted in bad faith, that insurance company can be subjected to monetary penalties. Here is an example of bad-faith by an insurance company and the huge penalties they can be faced with, as provided by the Associated Press (AP):
"A DeKalb County Superior Court jury has returned a $5.6 million judgment against Atlanta Casualty Co. for bad-faith practices in a lawsuit involving an 86-year-old woman who had automobile insurance with them. Dimple Thomas, now 86, collided with another vehicle when making a left turn in November 1992. An occupant of the other vehicle sued Atlanta Casualty and got a $60,000 judgment, which the company refused to pay and then sued Thomas claiming that it didn’t have to pay her claim because it had not been notified of the accident. In court, it was shown that on March 18, 1996, the company signed a certified letter giving them notice of the accident. The company did not provide defense and did not pay judgment of $60,000."