Insurance Bad Faith
Insurance is an arrangement in which a company provides a guarantee of compensation for a specified loss, damage, or illness in return for payment of a premium. We buy these policies to pass on the risk of loss to the insurance company. An insurance policy provides us with peace of mind knowing that if we suffer an unexpected loss, we will be paid for that loss in exchange for the premium we paid. However, for one reason or another, sometimes insurance carriers refuse to pay claims. When an insurance claim is ignored, improperly denied, or not reasonable, the insurance company may have acted in bad faith and may be forced to pay the insured not just the amount owed under the insurance contract, but also additional compensation.
Common cases involving bad faith insurance practices include:
- Failure to pay private insurance disability claims and property damage claims
- Failure to defend against lawsuits
- Failure to settle within the stated policy limits
- Insurance agent or broker negligence
If bad faith has occurred, in addition to paying the insured the amount owed under the terms of a contract, an insurance carrier may be forced to pay extra-contractual or punitive damages. These damages are designed to compensate the victim for the insurance carrier’s failure to pay, and also to punish and deter the insurance company from handling claims in a similar manner in the future.
For example, in one case, a client who was a professional truck driver injured his back while removing a rock that was wedged between his truck’s tires during the daily inspection of his rig. He went to the hospital, where they evaluated his complaints of back pain and released him from care. Several days later, he developed difficulty walking and was rushed to the hospital. He developed a serious spine infection because of his back injury and was forced into emergency life-saving spine surgery. The infection damaged his spinal cord and left him paralyzed from the waist down. He submitted the bills to his insurance company which he believed was a worker’s compensation policy. It was denied. That’s when he contacted our law firm. After reading the actual insurance policy language, it became clear that our client did not have worker’s compensation coverage and had instead purchased disability coverage and coverage for payment of work-related medical bills. Apparently, these policies are quite common among truckers who work as independent contractors for large trucking companies.
Paternoster Law Group filed a lawsuit in federal court alleging bad faith insurance claims practices. To avoid a potentially large punitive damages judgment, the insurance company quickly paid our client’s claim shortly after the lawsuit was filed for an undisclosed settlement amount far greater than the total amount of coverage provided for in the policy and paid for by our client.
If you have been unfairly denied an insurance claim, please call us for a free consultation.