The McKennon Law Group PC periodically publishes articles on its California Insurance Litigation Blog that deals with frequently asked questions in the insurance bad faith and ERISA area of the law. This is another such article in that series.
Generally, to establish a bad faith claim in first party cases (such as those involving life, health, disability, property and casualty, auto liability, and homeowner’s insurance), an insured must demonstrate that an insurer’s delay or withholding of benefits under the policy was unreasonable or without proper cause. The courts have determined that many types of conduct may constitute insurance bad faith, such as:
- Failure to accept an insured’s reasonable settlement offer.
- Biased investigation or factual determination, including:
- Misrepresenting the nature of the investigatory proceedings and the insurer’s employees/agents lied during the depositions or to the insured.
- Focusing on facts justifying denial, ignoring evidence that supported the claim, and failure to utilize objective standards in making its claims decisions.
- Retention of biased doctor to conduct an independent medical exam and to prepare a report that falsely minimized insured’s injuries.
- An insurance provider’s act in conducting a “pure paper” review, rather than an independent medical examination, constitutes “an indicator of bias.”
- Failure to conduct a thorough investigation, including:
- Failure to interview necessary witnesses.
- Failure to investigate beyond facts and coverage theories asserted by insured.
- Failure to consult with medical experts in appropriate cases.
- Unduly restrictive interpretation of claim form.
- Denial of a claim based on improper standards.
- Unreasonable delay in payment of claim.
- Deceptive, abusive or coercive practices to avoid payment of claim, including:
- Misrepresenting coverage.
- Intimidating prospective witnesses.
- Threats to close file without payment to pressure settlement.
- Groundless accusations against insured to pressure settlement.
- Arbitrary termination of benefits.
- Inadequate communication with insured.
- Failure to notify insured of certain policy rights.
- Unreasonably incorrect accountings.
- Unreasonable litigation conduct.
Insurance bad faith claims can be potent weapons for insureds or beneficiaries who have been mistreated by insurance companies in the handling of their insurance claims. Knowing what kinds of actions by an insurer constitute bad faith is therefore critical to understand if you are considering an insurance bad faith lawsuit. If you have a dispute with an insurance company and would like to discuss your matter with an attorney, please contact us for a free consultation.