If the insurance company denies the claim of the policy owner, the insurance company can be liable to insured driver for much more amount than the primary claim, if denial rises to extend of “bad faith.” Today in this post we will discuss the elements that any insured driver should prove to win any bad faith case, kind of damages which are available and insurance company’s probable defenses in face of bad faith claims.
What’s Bad Faith? What Should A Policy Holder Prove?
The “Bad faith” is the legal, technical term for when the insurance company denies claim without any reasonable basis. While term “bad faith” may imply that claim was denied to advance an insurance company’s interest at the expenses of driver’s interests that isn’t a requirement always in the successful bad faith case.
Usually, if the insurance company denies the claim simply because of an error or mistake in assessment, but possesses a practical basis for making the mistake that doesn’t qualify as the bad faith. In a few states, the policy owner should prove that insurance company failed in making a careful investigation before denying a claim.
The precise nature of any bad faith lawsuit differs from one state to another, but a common subject is that the circumstances and facts at the time of claim denial matter the most. If policy owner can demonstrate there are excellent reasons to guess claim investigation was careless for a reason, bad faith lawsuit more likely is to succeed if it seems that a guiltless mistake was made actually in an otherwise careful investigation of car accident.
What Types of Damages Can Be Recovered?
So, what types of compensation can you recover easily?
Firstly, the policy owner in bad faith cases can recover what an insurance company must have paid for driver’s primary claim that is the policy cover for the auto accident injury claim which another person brought against driver originally.
Next, the policy owner can even recover “consequential” damages, which occurred due to bad faith rejection of claim. These are the damages that were predictable result of having the denied claim. Examples are cost of defending any injury lawsuit which was brought against covered driver, including the auto accident attorney fees and amount of judgment and cost of suing insurance company to establish that coverage must have been granted. A few states offer that lawyer fees are recoverable like an item of the damages separate from significant damages, but results are same.
Policy owner might be able to recuperate damages for emotional damages caused due to the claim rejection. In case of needing to protect and payout for an auto accident lawsuit, if it must be covered by insurance, owner’s emotional distress can be quite harsh. Whether the emotional distress damages tend to be available depends on individual state.
Punitive damages also may be available if the policy owner can establish that the insurance company recklessly or intentionally acted to harm policyholder. While maximum policyholders that win bad faith claims might feel that punitive damage should be granted too, the real fact is there usually should be a clear proof of any egregious conduct by insurance company, not only opportunistic carelessness.
Some states have particular statutory penalties for the insurance bad faith claim. Typically, these penalties stop other damages from getting awarded to the policy owner, though statutory damages are hardly ever insignificant or more constructive to insurance company than the standard damages. In a few states, such laws specify that successful plaintiff in bad faith case are awarded three times amount of his/ her compensatory damages.