Overview
Our attorneys have extensive experience with insurance companies and have represented personal injury and workers compensation clients as well acted as house counsel for insurance companies and soils engineering firms. Bad faith claims can arise in property damage, personal injury, health and life insurance cases and our attorneys are well versed in the standards of care for each.
Our office is in the unique position of having litigated on both sides of insurance cases which give us a distinct advantage in representing our clients’ interests and rights. For a free consultation to discuss a potential or existing bad faith claim, please contact us.
General Information about Bad Faith
Insurance companies have a legal responsibility to treat their insureds fairly both in dealing directly with the insured and in dealing with third party claims against the insured. This responsibility it called the implied covenant of good faith and fair dealing. The responsibility is implied in every insurance contract, even if it is not specifically set forth in the written terms. If insurance company fails to deal fairly with the insured or a third party, a bad faith claim arises.
When an insured has a claim against the insurance company for alleged bad acts, the cause of action is a civil tort claim for bad faith. A bad faith plaintiff may seek the claim amount in dispute as well as exemplary or punitive damages against the insurance company. In addition to bad faith, the insured may also sue for breach of contract or other damages. In California, bad faith plaintiffs may also recover attorney’s fees insofar as those fees were incurred for the tort (bad faith) case. The award or judgment in a successful bad faith case may be significantly higher than the actual policy amount.
Types of Bad Faith Claims
Bad faith claims may arise in a variety of insurance situations ranging from homeowners claims for property damage to personal injury claims and health or life insurance claims. The responsibilities of the insurance company to deal fairly with the insured vary depending on the underlying basis for the claim.
First Party vs. Third Party Claims
A first party claim exists when the person making the underlying insurance claim is the insured and the claim is covered by the policy. In such a case, the insurance company had an obligation to properly investigate the claim, determine whether the damage is covered by the policy, appropriately value the damage and pay the proper value to the insured. This type of claim is common under homeowner’s or motor vehicle policies. Bad faith arises in a first party claim if the insurer fails to acknowledge that a claim was made, improperly or negligently investigates the claim, fails to assess proper value or fails to pay the insured.
A third party claim exists when a third party (not the insured) makes a claim with the insurance company against the insured’s policy. Once the claim is made, three obligations are triggered. All of these obligations must be performed in “good faith” meaning that the insurance company must act sincerely and without malice or intent to defraud. The obligations are as follows:
(1) Provide a defense for the insured against the claim. For most policies, the insurance company is responsible for all costs of the defense regardless of the insurance policy limits.
In some rare instances, the cost of the defense is paid out of the policy limits. A bad faith claim arises in a third party claim if the insurance company improperly refuses to defend the insured.
(2) Indemnify the insured, up to the policy limit, for any judgment as long as the claimed act or omission is covered by the policy. A bad faith claim arises in a third party claim if the insurance company improperly refuses to pay the judgment, up to amount of the policy limits.
(3) Settle “reasonably clear claims” within the policy limit. This obligation is California specific and case law dictates that the insurance company must settle “reasonably clear claims” within the policy limits in order to avoid the risk that the insured may be liable for a judgment over the policy limits. If the insurance company fails to settle such a claim, it may be liable for the entire amount of any judgment including the amount over and above the policy limits. See Comunale v. Traders & General Ins. Co., (1958) 50 Cal.2d 654.
Services We Provide
The Law Office of Howard L. Hibbard provides a aggressive representation to our bad faith clients, including, but not limited to: (1) evaluation on a case-by-case basis of the viability the claim and assessment of probability of success and defenses; (2) consultations, phone calls and case updates to clients, (3) preparation of all pleading and other documents; (4) legal research as necessary, (5) preparation of all trial/hearing exhibits and witnesses, (6) court or administrative hearing, arbitration and/or trial representation, (7) service of papers and court filings.
The Law Office of Howard L. Hibbard is well versed in insurance litigation. If you have questions regarding an issuance bad faith issue, please contact us for a free consultation.