The question asked in the title is a good question. However, it is a hard question to answer. A 2021, opinion from the Northern District of Texas, Fort Worth Division, lends some insight into how bad faith is analyzed by the courts. The opinion is styled, Cocanougher Asset No. 3, LLC v. Twin City Fire Insurance Company.
The facts of the case can be read in the opinion and will not be rehashed here.
Twin City filed a motion for summary judgement on the bad faith allegations of the plaintiff. In deciding the motion in favor of the plaintiff, the court explained how these situations are analyzed.