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Bad Faith Set Up… Separating the Real from the Real Insurance Propaganda

It seems like every other day a new article appears spouting off about how Bad Faith either needs to go away entirely or be restricted via new legislation. This position is often advanced by the insurance industry as they collectively paint bad faith as a tool by which greedy plaintiff attorneys take advantage of unsuspecting insurance carriers, which in turn raises the cost of the insurance premium for your average consumer. As Susan Powder once said, “Stop the Insanity!” Shame on insurance carriers and their lobbyists for making bad faith sound like it is a tool for nuisance litigation and windfall lawsuits. There are always people that will find ways to exploit litigation in some manner, but for insurance companies to hedge their bets with this narrow argument is flat out irresponsible.

Insurance carriers often argue that plaintiff attorney’s set up bad faith in order to obtain and/or generate extra contractual damages from insurance companies. For example, Johnny Negligent buys an auto insurance policy from ACME insurance to protect him in the event he injures another person as a result of his negligence in an automobile accident. In this hypothetical he contracts with ACME Insurance for $25,000.00 bodily injury limits and pays his premium for that protection. One day, Johnny Negligent rear-ends a vehicle when he is texting his friend and crashes his vehicle into a car occupied by Jane who is injured as a result. Jane car is totaled and she is rushed by helicopter with terrible injuries to a hospital where in a matter of days she incurs $75,000.00 in medical bills not including any future medical needs. Aside from her PIP (Personal Injury Protection) benefits that will pay for a small portion of the medical bills, Jane can collect a maximum of $25,000.00 against Jonny Negligent’s bodily injury policy. The $25,000.00 in coverage is clearly insufficient in light of the injuries sustained by Jane and the bills incurred as a result.

Jane hires an attorney to for her injury claim and they compile the medical records and bills and subsequently demand that ACME pay out the entire $25,000.00. This claim is obviously worth well in excess of the $25,000.00 and is clearly supported by the medical records attached to the demand. Attorney gives ACME insurance companies several weeks to review the claim and demands that they tender the policy limits. ACME owes a fiduciary duty to Johnny Insured and must protect their policyholder and look out for the best interest of such individual. They owe him a duty to act in good faith and pay this claim to protect him and release him of the possibility of a lawsuit and a hefty judgment in excess of the existing coverage. ACME Insurance decides not to pay out the policy limits. Instead, ACME starts off by asking for an extension in order to review the claim since the claims adjuster is out of town. Jane and her attorney agree to the extension and give them an additional two weeks. Two weeks later, the day this very demand expires, ACME calls the attorney’s office and request another extension because they want a single medical record that has no relation to the claim. The medical record requested is from eight years prior when Jane broke her ankle and was taken to the emergency room. It is now becoming clear that ACME is not handling this claim correctly and not looking out for the best interest of Johnny Negligent. They are granted yet another extension and provided the additional medical records that have little to no bearing on the value of this claim. The longer ACME keeps their money the more the corporate bottom line expands. This is Business 101.

Several weeks follow and the day the second extension and third deadline comes to fruition, the claims adjuster makes a $5,000.00 offer on this case. Insulting to say the least for a claim that is clearly worth in excess of the available $25,000.00 coverage. After some back and forth with Jane Injured’s attorney they refuse to tender the policy limits. By behaving in this manner, they are essentially not releasing Johnny Negligent from liability of this accident. Isn’t this why Johnny Negligent purchased this policy, which provides bodily injury coverage? Is it not the reason Johnny Insured pays his monthly premium?

By not tendering the available coverage, ACME has essentially dared the attorney and Jane to come get their money by pursuing la judgment through time consuming and expensive protracted litigation.

Wait, the insurance companies are the ones that always tell us that plaintiff attorneys are the culprits that clog up the court systems and file frivolous law suits. This is the concept that has been fed by the media and big insurance to the public for years. Corporate greed sees numbers and numbers only. The numbers will tell ACME that if they delay claims and force attorneys to file lawsuits by making unreasonable offers that a percentage of people will “settle” for the lower figure. These very “numbers” will tell the story that filing a lawsuit on a case like this and taking it to trial will not only take lots of time but also a significant amount of money that will never be available since there is only $25,000.00 of benefits once you travel that long road. ACME and every other major insurance carrier play this game and they know it very well. They are also aware that only a handful of plaintiff’s attorneys ever see the light of a courtroom. They understand that some of those fancy commercials where you see the attorney walking out of the courthouse have NEVER been to trial and will settle for what is offered. So why don’t all insurance companies and adjuster do just that? Bad faith. Bad faith is a protection not only for Johnny Negligent but also Jane Injured.

In this scenario Jane Injured sued Johnny Insured because ACME did not do the right thing. Two years later and after $40,000.00 spent by Jane Injured’s attorney a jury trial takes place. At the trial ACME Insurance is nowhere to be seen or heard from. Instead, Johnny Negligent is being sued for his negligent driving and a jury awards a $425,000.00 judgment in favor of Jane Insured. ACME is on the hook for only $25,000.00 of that and the other $400,000.00 is owed by Johnny Insured. That is the reality. ACME knew what would be the outcome but also counted on the numbers. The numbers tell them that they can take this course of action on many cases and rarely have someone go all the way. Jane Injured suffered very serious injuries and Johnny Negligent suffered a terrible injustice. Why should he be on the hook for this judgment? Why did ACME Insurance not protect their loyal policyholder by settling this claim two years prior when provided with numerous opportunities? Why did he faithfully pay his premiums to ACME for twelve years and when he needed them they looked the other way? Is this fair or otherwise acceptable? The answer is a resounding NO! This is why bad faith is not only enumerated in statute but also rooted in common law. You have the expectation, when you enter into such agreements (like Johnny Negligent did with ACME), that the insurance carrier will act in your best interest and protect you as opposed to thinking of their corporate greed. This is why bad faith is so important. It protects people when big insurance carriers do not act in a fair manner when evaluating and paying claims timely.

One could only imagine if bad faith were to go away how corporate greed and big insurance would benefit. They would be free to do as they pleased, when they pleased with no repercussions for their conduct. As a Clearwater personal injury attorney, I come across this very scenario or similar fact patterns weekly if not daily. We are often called upon by other law firms to review the conduct of insurance carriers or adjusters in the handling of a claim file. What we see often shocks us and of consumers only knew the truth bad faith would never go away. Sibley Dolman Gipe Accident Injury Lawyers, PA is currently representing a consumer injured in a motorcycle accident wherein there was only $10,000.00 in bodily injury coverage. Our client was transported from the scene of the wreck to the trauma unit at a local hospital where he stayed for over ten days. The insurance carrier was provided such information and instead of tendering the $10,000.00 policy limits and retiring the personal exposure of their policyholder; they asked for prior medical records. Our client sustained a traumatic brain injury. At mediation, the very same carrier offered over forty times the policy limits. This is the essence of bad faith. It is a tool that protects the consumer as it punishes the insurance carrier for not adhering to the very services they contracted with their policyholder to provide.