Insurance Bad Faith

Denying the insured individual, family or company the complete benefits listed in the policy, offering less compensation than what is due under the policy, unreasonably delaying payment to an insured. Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure.

Our Experience with Bad Faith Cases

Since entering the Real Estates & Insurance Establishment in 1985, Ms. Liljenberg has seen acts of insurance bad faith committed by agents, carriers, and insureds. She has seen cases where bad faith actions were readily evident, as well as cases where allegations of insurance bad faith had no basis.

Bad Faith Allegations against Carriers

Allegations of insurance bad faith dealings under Common Law are primarily based on an “implied duty of good faith and fair dealing” in the course of conduct. Many states have enacted Unfair Claims Practices Acts specifically detailing certain accepted and/or prohibited carrier conduct in handling claims. While laws vary by state, statutory language typically makes reference to:

• Deceptive claim practices.
• Misrepresentation of a material fact.
• Improper standards used to deny claims.
• Failure to explain policy conditions, provisions, exclusions.
• Unfair or deceptive trade practices.
• Failure to promptly settle claims once liability is clear.
• Failing to promptly provide a reasonable explanation for claim denial.
• Unreasonable delay/failure to investigate.
• False statements/False advertising.
• Unreasonably compelling insureds to institute litigation.
• Breach of contract.
• Misrepresentation of policy or insurer.
• Failure to act reasonably promptly in responding to communications.
• Failure to disclose a material fact.
• Failure to disclose policy limits.

Policyholder Obligations

While bad faith statutes typically detail acceptable/prohibited carrier conduct, policyholders also have certain “Duties In The Event Of Occurrence, Offense, Claim Or Suit” when filing a liability claim, including notifying the carrier:

• As soon as practicable.
• Immediately send carrier copies of any demand, summons, and legal papers.
• Assist carrier in obtaining records and other information related to the claim.
• Names and addresses of any injured persons and witnesses.
• How, when and where the “occurrence” or offense took place.
• Cooperate with the carrier in the investigation and settlement.
• Nature and location injuries or damages arising out of the “occurrence” or offense.

Policyholders have certain obligations to the carrier when filing property claims. The insured’s “Duties In The Event Of Loss or Damage” include:

• Permit us to inspect the property proving the loss and examine (and/or) make copies your records.
• Prompt notice of the loss and a description of the property involved.
• Take reasonable steps to protect Covered Property from further damage.
• Provide inventories of the damaged and undamaged property.
• Permit us to take samples of damaged and undamaged property for inspection, testing.
• Send us a signed, sworn proof of loss.
• Notify the police if a law may have been broken.
• Provide a description of how-when-where the loss occurred.
• Cooperate in investigation or settlement of the claim.

In certain cases, an insured can be held to have committed bad faith by:

• Failing to provide relevant claims information.
• Failure to cooperate.
• Misrepresenting relevant claim information.

Bad Faith Damages

While most claims are handled properly, if/when allegations of insurance bad faith are sustained, damages potentially payable to a plaintiff include:

• Punitive damages (which may exceed actual damages).
• Attorneys fees.
• Economic loss (e.g. – loss of credit rating, loss of professional reputation).
• Liability in excess of policy limits (e.g. – Stowers Doctrine).
• Statutory penalties and/or interest.
• Emotional distress.