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INSURANCE BAD FAITH

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When you file an insurance claim with an insurance company, by law, in any state, that company owes you a duty to act in good faith.  Simply put, this means that the insurance company must not look for ways to escape its obligation to investigate the claim or to pay you.  Doing so would constitute bad faith.

 

Bad faith claims and lawsuits may stem from one or more of a number of actions or inactions by the insurance company from denial of coverage to failure to negotiate a settlement.  Here are some of the typical reasons insurance companies get sued for bad faith: 

  • Unwarranted denial of coverage 

  • Failure to communicate pertinent information to the claimant 

  • Failure to conduct a reasonable investigation of the claim 

  • Refusal to pay the claim without investigating 

  • Failure to deny or pay the claim within a reasonable period of time 

  • Failure to confirm or deny coverage within a reasonable period of time 

  • Failure to attempt to come to a fair and reasonable settlement when liability is clear 

  • Offering substantially less money to settle than the true value of the claim 

  • Failure to promptly provide a reasonable explanation for denial of a claim 

  • Failure to enter into any negotiations for settlement of the claim 

  • Failure to respond to a time-limit demand 

  • Failure to disclose policy limits 

Bad faith litigation can take many different forms and will, like the underlying cases they stem from, either result in a settlement with the insurance company, an arbitration decision, or a verdict one way or the other.

 

Here are some different types of cases and their outcomes.  Keep in mind that the cases presented here are for illustrative purposes only. Each case is unique, including yours, and no one case will have exactly the same result as another. 

Boicourt v. Amex Assurance Company

Jury Award: $2 million

A boy severely injured in a vehicle accident settled for more than $2 million pursuant to a policy that provided only $100,000 in coverage, because the insurance carrier initially refused, in bad faith, to disclose the policy limits. 

Matson Terminals v. Home Insurance Company

Settlement: $33.6 million

Home Insurance Company denied coverage for a $10 million earthquake claim, and the jury concluded the denial, based on a policy exclusion, was in bad faith.  The jury awarded $11,000,000 in punitive damages.  The appeals court, in affirming the award that included $23.5 million in compensatory damages, held that the insurer led the policyholder to believe there was coverage, and encouraged it to initiate repairs. 

David Clayton v. United Services Automobile Association

Jury Award: $3.9 million

A jury found the insurance company's offer of $10,000 on policy limits of $300,000 to parents whose only child was killed in an auto accident was unreasonable and in bad faith.  An appellate panel affirmed the award.  

Vann v. The Travelers Insurance Company

Jury Award: $26.5 million

The former owner of an auto repair shop was asked to vacate the premises after his landlord died.  Following, he was sued for causing environmental damage on the property.  He asked his insurance company to provide him with a defense.  First they denied he had a policy, and then, after admitting such a policy existed, they inundated him with burdensome and harassing requests for information with which he could not comply.  After denial of the claim, Mr. Vann sued for bad faith and the jury agreed.  Traveler's Insurance Company appealed

all the way up to the U.S. Supreme Court were unsuccessful. 

Ceimo v. Paul Revere Insurance Company

Jury Award: $84.4 million

A jury found that the insurance company committed bad faith when it wrongfully denied disability benefits to a cardiologist in violation of the insurance policy and without a reasonable or proper investigation.  The jury awarded $5.4 million for pain, suffering, and emotional distress, and $79 million for punitive damages.

Fox v. Health Net

Jury Award: $89.3 million

In a case involving a health insurance company denying critical medical care to a patient, the jury awarded $89.3 million to the family of a woman whose health maintenance organization (HMO) refused to pay for a new break-through medical treatment that virtually all of  her physicians agreed was necessary and critical to treat her breast cancer. Without that treatment, the woman eventually died. 

The award, one of the largest in the country involving the denial of medical care by an insurance company, sent a strong message throughout the health insurance industry, which has always put profits over people and has devised numerous ways to deny coverage for costly treatment  and therapies, which the health insurance companies claim is "experimental" in order to deny coverage.  

 

Women's health advocates, who say, with strong support from numerous physicians and medical associations, that patients with an otherwise difficult diagnosis and prognosis deserve access to new and promising treatment, praised the jury award. 

The jury awarded the Plaintiffs $12.3 million in compensatory damages and $77 million in punitive damages, which was upheld on appeal.