Insurance Companies owe their Insured a contractual and common law duty of good faith and fair dealing. When an insurance company unreasonably refuses to compensate a victim of a motor vehicle crash or other mishap and breaches their obligations of good faith and fairness, their actions are commonly known as “bad faith”. “An insurer’s breach of the implied duty of good faith and fair dealing may give rise not only to a breach of contract claim but also to tort liability.” Goodson v. Am. Standard Ins. Co., 89 P.3d 409, 414 (Colo.2004).
“In every insurance contract, there is an implied covenant of good faith and fair dealing.” Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550, 556 (Colo.App.1998); see also § 10-1-101, C.R.S.2010 (declaring that persons providing insurance services to the public must “be at all times actuated by good faith“)
The best example of bad faith would be a garden variety rear end car accident in which an automobile is involved in a collision with an uninsured hit and run motorist driving a tractor trailer truck. The injured victim has a boatload of medical bills totaling $25,000 as well as lost wages and pain & suffering. The seriously injured auto accident victim has a herniated disk as well as traumatic brain injury (TBI) as a result of the auto wreck. The insured victim only has $25,000 of uninsured (UI) and underinsured motorist coverage (UIM). The insurance company unreasonably delays / denies payment of the uninsured motorist claim for a couple of years and forces it’s insured to arbitration to get some semblance of justice.
The highest Court in Rhode Island, perhaps, said it best, “The insurer’s duty is a fiduciary obligation to act in the best interests of the insured” – Michelle ASERMELY as Assignee of Mark Rendine and Julieanne Bernier v. ALLSTATE INSURANCE Company http://caselaw.findlaw.com/ri-supreme-court/1403678.html#sthash.f4Dssz1k.dpuf
Unfortunately, Insurance usually rejects the proposition that they owe a fiduciary obligation to anyone besides their stockholders. They pay as little as possible and deny as many claims as they can. Insurance companies are notorious for delaying payment of legitimate claims so they can invest the reserve for their own purposes. Insurance has no interest in properly and fairly resolving claims. Insurance companies are notorious for shoddy investigations, confusing the issues and delaying as long as possible.
“Under the law of most jurisdictions in the United States, insurance companies owe a duty of good faith and fair dealing to the persons they insure. This duty is often referred to as the “implied covenant of good faith and fair dealing” http://en.wikipedia.org/wiki/Insurance_bad_faith
Personal Injury attorneys in Rhode Island and across the United States are well aware of big insurance’s lack of empathy towards the plight of seriously injured victims and their families. At the end of the day, they DO NOT CARE. I call it the 5 d’s of insurance: DUCK, DELAY, DENY, DEFEND and DEFLECT.
Occasionally, a top personal injury attorney will bring a bad faith case to trial and a jury punishes insurance for their coercive and manipulative tactics. Sometimes, the insurance company gets whacked for a multimillion dollar punitive damages judgment.
Sadly, insurance companies have created a pervasive culture of greed and arrogance in which adjusters quickly learn that their obligations are to the owners and stockholders of the insurance company and NOT to their insured. This culture puts corporate profit over providing proper coverage to their insured and properly compensating injured victims in motor vehicle accidents and premises liability claims.
Bad faith conduct in truck accidents, motorcycle accidents and motor vehicle collision claims can take many shapes and forms. The most common types of bad faith are:
–Breaching the duty to defend an Insured against a claim, lawsuit or litigation. Unfortunately, an Indemnity company has the right to make the initial decision of whether they will provide their insured a negligence insurance Defense attorney to defend a claim for injuries or wrongful death as a result of a car accident, premises liability claim or other personal injury cause of action.
If a Liability Company violates the insurance contract and refuses to defend premises liability (slip and fall) or other negligence litigation by providing a competent accident attorney, the insured can bring their insurance company to court to seek justice in what is commonly known as “bad faith litigation.”
According to vklawyers, “Most auto, homeowners and business insurance policies have liability provisions. This means that if you are sued, and you are covered under the policy, the insurance company has to pay for your insurance attorneys plus other expenses necessary to defend you. Unreasonably refusing to provide such a defense is bad faith.” http://www.vklawyers.com/articles/whatis-bad-faith.html
What does indemnify mean? According to http://legal-dictionary.thefreedictionary.com/indemnify “To compensate for loss or damage; to provide security for financial reimbursement to an individual in case of a specified loss incurred by the person. Insurance companies indemnify their policyholders against damage caused by such things as fire, theft, and flooding, which are specified by the terms of the contract between the company and the insured.”
–Breaching legal duty to indemnify* for a claim. If a company does not indemnify it means that they refuse to pay the claim, judgment or order. In some matters the insurance company will provide a insurance defense tort lawyer to defend the tort claim but will do so under a “reservation of right”.
“The reservation of rights letter usually serves as a notice that your insurance company has reserved its right to deny coverage at a later date based on the terms of your policy.” Freeadvice http://law.freeadvice.com/insurance_law/insurance_law/reservation_right_letter.htm#ixzz36VypYxcx
In Rhode Island, if an insurance company is unclear about whether the insured is entitled to coverage they may file a declaratory judgment claim. In the event an insurance company wrongfully denies coverage, an insured can also file a declaratory judgment against the insurance company asking that they be ordered to defend and provide coverage. A declaratory judgment is essentially asking the Court to determine whether there is an obligation to defend and indemnify against loss.
In a notable case out of Rhode Island, a toddler drowned in a coy pond on a property. The insurance company, Providence Mutual Fire Insurance Company, filed a declaratory judgment cause of action to determine that “that no coverage exists under the Providence Mutual homeowners insurance policy for claims by Defendants Pamela and Paul Metro against the homeowners and policyholders, Defendants Kevin and Inez Neary.” PROVIDENCE MUTUAL FIRE : INSURANCE COMPANY : C.A. No. WC 11-0236 : KEVIN NEARY; INEZ NEARY; : PAMELA METRO, http://www.ripersonalinjurylaw.com/wrongful-death-attorney/ http://statecasefiles.justia.com/documents/rhode-island/superior-court/11-0236.pdf?ts=1344007402 In this premises Liability, wrongful death case, the Court determined that there was no insurance coverage for the wrongful death of the child as a result of the business exclusion in the policy. (The insureds’ were operating a daycare at their residential property.)
Breaching duty to be reasonable in settling claims – the RI Top Court stated “An insurance company’s fiduciary obligations include a duty to consider seriously a plaintiff’s reasonable offer to settle within the policy limits”. Assermely v Allstate – See more at: http://caselaw.findlaw.com/ri-supreme-court/1403678.html#sthash.f4Dssz1k.dpuf
“Failing to timely, thoroughly, objectively, and fairly investigate your insurance claim.” http://www.vklawyers.com/articles/whatis-bad-faith.html
In Assermely v Allstate the Rhode Island Supreme Court sitting in providence went a set further and and instituted rules that even if the insurance company acted in good faith they were obligated to pay the full judgment if the injured victims personal injury lawyers sent a demand within the policy limits and they refused to settle then they would be responsible for the entire judgment including interest!
The Rhode Island Supreme Court determined that “an insurance company has a fiduciary obligation to act in the “best interests of its insured in order to protect the insured from excess liability * * * [and to] refrain from acts that demonstrate greater concern for the insurer’s monetary interest than the financial risk attendant to the insured’s situation.” Medical Malpractice Joint Underwriting Association of Rhode Island v. Rhode Island Insurers’ Insolvency Fund, 703 A.2d 1097, 1102 (R.I.1997). This fiduciary obligation extends not only to the insurance company’s own insured, but also, as in this case, to a party to whom the insureds have assigned their rights. Michelle ASERMELY as Assignee of Mark Rendine and Julieanne Bernier v. ALLSTATE INSURANCE COMPANY. – See more at:http://caselaw.findlaw.com/ri-supreme-court/1403678.html#sthash.f4Dssz1k.dpuf
Contact RI and Massachusetts Attorney David Slepkow here