On June 18th, Wheeler, DiUlio & Barnabei hosted a lunch & learn webinar on the topic of insurance bad faith claims. Partner Anthony DiUlio presented what constitutes ‘bad faith’ as well as best practices for policyholders when communicating with insurance carriers. After his presentation, DiUlio answered viewers’ questions.

The webinar also addressed:

  • Bad faith claims under common law versus statutory law.
  • Examples of when the court ruled the dispute was in bad faith and when bad faith was not enough.
  • How to prove knowledge – the main reason these claims fall short.

Here is a recap of Partner DiUlio’s Insurance Bad Faith webinar:

What is Bad Faith?

In simple terms, ‘bad faith’ is when an insurance company 1) acts unreasonably and 2) knows or recklessly disregards that they are being unreasonable. ‘Unreasonable’ is the key term in this definition. Being wrong is not bad faith; however, being unreasonable with the knowledge or reckless disregard does authenticate bad faith.

The exact definition of bad faith varies state by state, and so does the type of bad faith. There are two types of bad faith: common law bad faith and statutory bad faith. Common law is based on case law and generally follows the same definition as above. Statutory bad faith outlines a bad faith definition and may also state additional damages. However, these are not mutually exclusive. Be sure to check that you are filing properly according to state guidelines.

What are carriers doing to make filing a bad faith claim harder?

The following are actions that carriers do to make bad faith harder:

  • They relied upon experts, making contesting bad faith difficult for policyholders;
  • They are making substantial payments. However, it is important to remember that carriers acting in good faith 99% of the time do not cancel out the 1% bad faith;
  • Carriers give the policyholder a chance to respond to change their mind, and you either fail to do so or do not respond properly. If you do not respond, it will make proving bad faith harder. In addition, you should respond with more information and documentation to prove why they are wrong;
  • Lastly, if you have errors in your estimate or claim file, you lose credibility in your argument against carriers.

How to prove knowledge?

Most insurance bad faith claims lack proof of knowledge, or that there was a reckless disregard. The best way to prove knowledge is to document everything. Written documentation is difficult to refute and can support your case. Document all opinions, decisions, and even summarize phone calls and send the outline back to your carrier or insurance department. Make sure to include a statement such as the following:

“If any of the above is incorrect, please let me know, in writing, within the next 5 business days. If I do not hear from you, I will accept that as your confirmation that the above is correct”

How likely am I to win a bad faith insurance claim in the United States?

As DiUlio noted in his discussion, there were over six million residential bad faith claims in the United States in 2016. Out of those claims, there were only 425 claims with a bad faith verdict. Now this doesn’t account for all of the settlement, but you get the idea That means that only 0.006% of claims resulted in bad faith verdicts. This statistic exemplifies how difficult it is to prove bad faith. Luckily, if you get the right attorney, you have a better shot. And there are measures you can take to support a future case.

What should you be doing in advance of potential bad faith claims?

There is a list of best practices that policyholders should remember when dealing with insurance matters.

  • Write and document everything so that you have substantial proof when filing a lawsuit;
  • Keep a claims log of your communications with everyone involved;
  • Be the nicer, reasonable person;
  • Give your carrier an opportunity to fix their mistake. Most of the time, carriers will not fix mistakes and your patience will support your case. In addition, it is only another step towards bad faith if the court sees you that you allowed the carrier to fix a mistake and they still refused;
  • Consult an attorney for advice and assistance moving forward with bad faith claims.

Interested in joining us for our next lunch and learn webinar? Click here to register.

Have any questions about the appraisal process? Click here to contact us.