We have all been bombarded with cute and clever TV advertising promoting various insurance companies. From cute geckos and "Limu Emu", to scary cavemen and obnoxious "Flo", the message is the same: insurance companies are here to help us in our time of need. Most times that is true. But what happens after a claim is made and the insurer suddenly turns that cozy relationship with its insured into one managed at arm's length? When it no longer appears the insurer is protecting the interests of its insured by seeking a prompt, fair and good faith resolution of a pending claim?
There are two basic types of "Bad Faith Claims" - First Party and Third Party bad faith. First party claims arise when the insured believes his or her own insurance company is not acting in good faith in protecting their financial interests. These claims are a creature of statute, specifically Florida Statute 624.155 which sets out the various ways an insurer can be found guilty of acting in bad faith. They basically involve circumstances where the insurer had the ability and opportunity to settle a claim but did not. They often arise in motor vehicle accident cases where an insured makes a claim against his uninsured motorist coverage. For example, say a person is injured in a crash caused by another(uninsured) driver and incurs $85,000.00 in medical bills. He thereafter demands that his insurance carrier pay the $100,000.00 limits of his UM policy to cover as much of his past and future medical expenses as possible. Claiming that its insured may have been partially at fault in the accident, or that the medical expenses are excessive, the insurer offers to pay only $25,000.00.
Under these circumstances, the insured is required to file a "Notice of Civil Remedy" with the Florida Department of Financial Services in which the insured designates the specific grounds for the complaint, provides a brief factual background and the damages that have resulted. This is all done on an online form - a copy of which goes to the insurance company, which thereafter has 60 days to remedy, or "cure" the complaint. If the insurer refuses, the insured can then file suit against the uninsured driver and obtain a jury determination of his actual damages. If the jury awards $300,000.00, the insured can demand payment of the excess damages above the $100,000.00 policy limits and seek attorneys fees and perhaps even punitive damages in a separate lawsuit against his insurer.
Third party bad faith occurs when the insurer fails to properly defend its insured against a claim made by a third party - usually the other driver in a motor vehicle accident. If the insured is at fault in the crash, the insurer has an obligation to defend the case and pay damages up to the available policy limits. Unfortunately, that is not always the case. Pre- suit, the insurer may refuse to pay anywhere near the insured's $100,000.00 policy limits, even though the damages sustained by the third party driver may substantially exceed those limits. In doing so, the insurance company puts its insured at great risk of being personally liable for damages awarded in excess of the policy limits - which is technically all the insurer is required to pay.
Say the jury awards the third party $300,000.00 in total damages. This is strong evidence that the insurer has dealt in bad faith towards both its own insured and the other driver. At that point, rather than trying to force the insured to pay (which most times they can't), the insured will assign his right to sue his own insurance company to the other driver. Once again, that party can sue the insurance company for the excess verdict, attorney's fees and maybe punitive damages.
In most cases, insurance companies employ a sophisticated computer model to accurately calculate the value of claims made against them. However, often times the computer programs are simply wrong in that they don't allow for human factors that juries do. At times, claims handlers are given marching orders to hold the line on certain types of claims. As a result, the ability to pursue claims for bad faith acts as either a deterrent to such behavior, or a means to eventually obtain the proper measure of damages. Should you or a loved one have a pending claim where you suspect insurance company bad faith, please contact me at my offices at 727-822-3700 to schedule a no-cost consultation.