What is a Bad Faith Insurance Claim?
Insurance companies have an “implied covenant of good faith and fair dealing” meaning that if the insurance company fails to deal fairly, then you have grounds for a bad faith insurance lawsuit. Insurance companies are held to a high standard because of A.) Their vast resources which put them at an advantage, and B.) The severe financial impact their denying, undervaluing, or delaying a claim could have on their policyholders.
In personal injury cases, a defendant can bring a lawsuit against an insurance company for a number of reasons. Here are some examples of bad faith insurance cases:
• After inadequate investigation of damages, the insurance company undervalued or denied your claim
• The insurance company took an unreasonable amount of time to compensate you for your claim
• The insurance company intentionally misrepresented or underrepresented your policy coverage
• Your claim was denied, and you weren't given a viable cause as to why
With that said, not every claim rises to bad faith, and when in doubt you should thoroughly read through your insurance policy. These contracts are intended to be complicated with lots of exceptions that protect insurance companies from scenarios where they chance being vulnerable to a lawsuit.
If you do in fact have a bad faith claim, your lawyer will send out a demand intended to force an insurance company to act or negotiate in good faith. There are broad consumer protection laws that punish insurance companies if they act in bad faith. The two types of insurance bad faith are:
1. 3rd party or common law bad faith
2. 1st party or statutory bad faith
3rd Party or Common Law Bad Faith
A hits B in the rear, causing B serious injuries requiring surgery on his neck. B goes after A's auto liability insurance policy and asks the liability insurance carrier to settle for the full $100,000 limits. After reviewing all medical records and bills, A's insurance company refuses to settle for the full $100,000 limits. B appears to have a great bad faith case against A's insurance company for 3rd party bad faith, and they could be liable for the full value of B's injury.
Technically speaking, the plaintiff must first get a judgment against the tortfeasor and then go after the actual defendant for the excess, assuming it exceeds the policy limits that were not paid prior. The defendant would then initiate a contractual bad faith action against his own insurance company for the excess amount plus any punitive damages if they apply. Practically speaking, the defendant could assign his claim to the plaintiff and the same plaintiff's lawyer could handle everything. The significant downside to this is that if the bad faith claim is assigned to the plaintiff, then the plaintiff cannot recover punitive damages. Turns out juries don't hesitate to slap insurance companies with punitive damages in bad faith actions. Ideally, one lawyer gets the judgment, and if the excess isn't paid and accepted immediately, the claim should be handed over to another bad faith specialist lawyer. That lawyer would approach the defendant and file the bad faith action in their name against the insurance company, usually in federal court.
Insurance Bad Faith in Georgia
1st Party or Statutory Bad Faith
Same case as above but B's insurance company pays the $100,000 in limits and A then goes after his own 1st party underinsured motorist coverage that has limits of $25,000. If B's UM coverage denies the full $25,000 payout, B might then have a 1st party bad faith action. I certainly wish Georgia had stronger 1st party bad faith laws but they don't, and insurance companies predictably leverage this against a plaintiff. Here is the statutory penalty that “protects” consumers.
O.C.G.A. 33-7-11(j): If the insurer shall refuse to pay any insured any loss covered by this Code section within 60 days after a demand has been made by the insured and a finding has been made that such refusal was made in bad faith, the insurer shall be liable to the insured in addition to any recovery under this Code section for not more than 25 percent of the recovery and all reasonable attorney's fees for the prosecution of the case under this Code section. The question of bad faith, the amount of the penalty, if any, and the reasonable attorney's fees, if any, shall be determined in a separate action filed by the insured against the insurer after a judgment has been rendered against the uninsured motorist in the original tort action. The attorney's fees shall be fixed on the basis of competent expert evidence as to the reasonable value of the services, based on the time spent and legal and factual issues involved, in accordance with prevailing fees in the locality where the action is pending. The trial court shall have the discretion, if it finds such jury verdict fixing attorney's fees to be greatly excessive or inadequate, to review and amend such portion of the verdict fixing attorney's fees without the necessity of disapproving the entire verdict. The limitations contained in this subsection in reference to the amount of attorney's fees are not controlling as to the fees which may be agreed upon by the plaintiff and his attorney for the services of the attorney in the action against the insurer.
As one might notice that is a lot of work to go through to collect a secondary action of attorney's fees. I know many plaintiff and defense lawyers that unequivocally say that UM bad faith does not exist. If limits are $25,000 and we get an excess verdict of $2 million, the most the insurance company could be on the hook for is an additional $6,250 plus attorney's fees.
In my own practice, I find that where damages are obvious and irrefutable – say surgical cases or catastrophic injuries – insurance companies tend to pay immediately on UM claims and not waste much of anyone's time. On the soft tissue cases, they tend to put up more of a fight.
Contact a qualified bad faith attorney today!
If you believe your insurance company is acting in bad faith, don't be afraid to question their decision of the claim, and do so in writing. You will also want to make sure you have a qualified legal team on your side. An experienced bad faith lawyer can help you determine if you have a case and guide you in the process. Contact us to schedule your FREE consultation or reach out to our office directly at (404) 618-0960.