Bad Faith Claims
There are times when you can take advantage of bad faith conduct by the insurance company. If you have presented the insurer with solid proof that your case is worth well in excess of policy limits, and they fail to pay promptly, you can pursue the insurer for bad faith damages. This can transform a $15,000 insurance policy into one for unlimited limits. A true story, ongoing in my office, will illustrate.
Gary is a 17 year old boy who was injured in a horrific head-on collision. He was riding with friends on a winding one lane street. Gary was a passenger. There were two other cars that were racing with the car Gary was in. Gary’s driver went into the lane for opposing traffic and crashed head-on with another car. Two people died and five others, including Gary, sustained terrible injuries. It is now a year after the crash, and Gary’s brain trauma appears to be permanent. He missed the school year and may never heal to the point where he can work for a living. He also suffered severe bodily injuries. Most worrisome to his parents is his impulsive behavior and combativeness. A moment’s recklessness transformed him from a happy-go-lucky teenager into something far different. All of the insurers but one immediately offered their policy limits. The seven claims for those involved in the crash are worth many millions of dollars. The one insurer that held out insures one of the drivers who was drag racing, but was not in the crash itself. We produced witness statements that tied that driver to the drag race. That driver sped up when the driver of the car Gary was in tried to get back into the proper lane. This led directly to the head-on collision. There is no doubt that this negligence/recklessness required the insurer to pay out its policy limits. And yet it failed to do so for a period of two months. Finally, two months after receiving definitive proof of all this, they tendered their limits.
I have not accepted this offer.
The issues this true story raises involve the question of bad faith. If the insurer, by failing to offer policy limits in a timely manner, exposed its insured to an excess judgment, that could be bad faith. If so, it can be pursued for the full amount of the damages, without regard to the policy limits. Here is how it works.
If I and the other plaintiffs’ lawyers turn down the offer and pursue the case to judgment, we can expect to obtain verdicts totaling $10,000,000.00 or more. The insured driver would have these verdicts hanging over his head because his insurance company didn’t settle the case when it could have. The insured driver can claim that his insurer acted in bad faith by failing to settle for policy limits in a timely manner. We will ask the insured to give us an assignment of that claim against his insurance company, and then we will pursue the full amount of the verdicts from the insurer. If we can prove bad faith conduct, we can collect the full amount.
Bad faith conduct is not simple to prove. The burden of proof is higher than usual. We must prove bad faith conduct by “clear and convincing evidence,” not just by a “preponderance of the evidence.”
In Gary’s case, we may not be able to prove bad faith by clear and convincing evidence. The insurer took 60 days to offer its limits. That is longer than it should have taken, but probably not bad faith. It takes time for an insurer to process claims, especially complex ones. A seven plaintiff claim with horrific injuries resulting from a drag race is complex. Add in that the insured was not involved with the crash itself. It is understandable that the claims would have to be reviewed at multiple levels at the insurance company.
I sent a Request for Production of Documents to the insurer. I hope to obtain the statements and other investigative materials that the insurer compiled in this case. If I find out that the insured admitted to being in the drag race right at the outset, that will strengthen a bad faith case. If he denied this, there probably is little hope. Given the potential payout, it is well worth a short delay to obtain these documents.
Insurance companies are bureaucracies that do not attract the best and brightest. So mistakes and snafus happen. Sometimes mean-spirited or lazy claims adjusters back burner or intentionally ignore meritorious claims. That is not necessarily bad faith conduct. If you think you have a viable bad faith case, you will need to learn to distinguish simple negligent claims handling or posturing from intentional or gross delay, obfuscation, or other oppressive tactics.
Here is the “bad faith letter” I sent on this case:
RE: My client: Edmund C., png of Gary C.
Your Insured: Robert Griffin
Your claim number: 58 37 E 2342
Date of Loss: September 10, 2010
Dear Mr. Insurer:
Be advised that my client, Edmund C, png of Gary C. will accept the sum of $100,000.00 in full settlement of this claim against your insured. This offer will remain open until April 1, 2011. Thereafter, no offers of settlement within your client’s insurance coverage will be considered. My client will look to your insured and Nationwide for satisfaction of any verdict in excess of $100,000.00.
Liability of Robert Griffin is readily apparent. The interviews conducted subsequent to the collision reveal that Mr. Griffin was involved in a car race from BlueGroveHigh School to the Wawa in Reddale. This race with Jon Prince and Mary Smith lead directly to the crash.
You already have the Discharge Summary, Trauma Admission Note, and Consultation and Operative/Procedure Reports for Gary. You are aware that he suffered the following injuries:
Right leg deformities
Bilateral acetabular fractures
Right fibular fracture
Intraparenchymal hemorrhage
Hemorrhagic contusion of the left orbital frontal lobe
Small subdural hemorrhage
Rib fractures
Ventilator-dependent respiratory failure
Left subdural hematoma at the tentorial leaflet
Left pulmonary contusion
Right inferior pubic ramus fracture
Facial lacerations
Gary was discharged from DelawareHospital on September 21, 2010. He then began a course of treatment at New Jersey Rehab that continues to this day. The treatment began with physical therapy and was followed by cognitive therapy and finally psychotherapy. I have photographs showing severe facial scarring that I will be happy to share with you.
Unfortunately, Gary’s brain injury is severe and has dramatically altered his personality. He has been unable to return to school because of his combativeness and impulsivity. It is unknown whether he will ever return to formal education or be employable.
It appears that Nationwide has three choices.
1. Accept our demand of $100,000.00 within the time limit set forth in this letter by certifying the policy limit and tendering a Release.
2. Advise that the coverage is in excess of $100,000.00. This will result in a withdrawal of the demand and renegotiation of this claim.
3. Refuse our demand either formally or by failing to act in accordance with the stated time limits. This will result in withdrawal of the offer and an absolute refusal on our part to settle the claim for $100,000.00 or less at any stage of the proceedings.
Please notify your insureds of their potential personal liability in the event that the claim is not settled by April 1, 2011. If you need more time, please let me know.
Very truly yours,
EVAN K. AIDMAN
