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Bad faith: An insurance company and its money are seldom parted p2

Mon Jan 13th, 2014 on     Bad Faith Insurance,    

We are talking about a bad faith lawsuit that settled for $18 million. The case is not from Florida, but, as we said in our last post, it’s rare for even legal periodicals to write about these cases. That is not to say, however, that bad faith litigation is rare.

The insureds are the parents of two brothers involved in a terrible car accident in 2003. The 15-year-old suffered a traumatic brain injury and is left with permanent physical limitations as well as cognitive difficulties. He sued his brother, who had been driving, and was awarded more than $15 million in damages. The auto policy had a $100,000 limit for bodily injury.

The insurer delayed and balked and, in effect, refused to pay the claim. Months passed without the company making any offer to settle. Tired of the runaround and anxious to move on, the boys’ parents sued.

According to the family’s attorney, an offer did eventually come. To settle, though, the insurer required that the boy release all other claims against the insurance company. Punitive damages were off the table as well, the insurer argued, because the statute of limitations had run on the bad faith claim.

As for the $100,000 limit, the attorney argued that “any reasonable insurance professional” would have to realize that the harm suffered by the boy far exceeded the coverage. The irony, of course, is that the insurance company could have paid the $100,000 as soon as the family filed the claim and saved itself millions of dollars.

An attorney not involved with the case but knowledgeable about insurance litigation said he was not surprised by the insurance company’s response. Insurers forget “their contractual and ethical obligations to pay claims when they are due,” he wrote. A refusal to pay a legitimate claim constitutes bad faith, the attorney added, and bad faith is not only illegal but is an expensive route for an insurer.

Source: Pennsylvania Record, “Plaintiff’s attorney secures $18 million settlement in insurance bad faith case stemming from car wreck,” Jon Campisi, Jan. 3, 2014

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