In a big win for insurance policyholders in California, a San Diego federal judge expanded the scope of what policyholders whose insurer refuses to settle or denies a claim in bad faith can receive in litigation against the insurer in what is known as a bad faith claim. This decision allows consumers additional rights to obtain documents and information previously shielded from disclosure (or the insurers contended were shield from disclosure) in lawsuits filed by consumers against insurers for breaching California law requiring that the consumers be treated with good faith and their claims be subjected to a fair claims handling process. This decision, in expanding access to the underlying materials from the insurers regarding the handling of a claim that a consumer believes to have been handled in bad faith by the insurer, is a win for California consumers. It also will help to ensure that California consumers are treated fairly by insurers by keeping some of the same insurers’ worst behavior in check.
What Is a Bad Faith Claim Against an Insurer?
Bad faith claims are a type of lawsuit against an insurer in which the policyholder sues his or her own insurer for not properly investigating, evaluating, and handling a claim in the manner required by California law. All insurance coverage is based on a contract. In exchange for the policyholder paying premiums, insurance carriers have a legal duty to provide the coverage specified in the insurance policy, to live up to the terms of the policy, and to pay valid claims as provided for in the policy. Implied into each and every contract signed or made between two parties in California, including every insurance policy, is a duty to engage in good faith and with fair dealing under the contract. In addition, specific to insurance policies, insurers that do business in California are also required to use both good faith and fair claims practices in adjudicating claims made by their policyholders under insurance policies.
California law defines certain conduct by an insurer which qualifies as bad faith. They include, among other things, (ii) an unreasonable denial of policy benefits; (ii) failing to respond promptly to a policyholder’s claim; (iii) failing to approve or deny a claim within a reasonable time period; (iv) refusing to make a good faith effort to fairly settle claims when liability is clear; (v) attempting to settle a claim for an unreasonable amount; or (vii) failing to provide prompt justification for the denial of a claim.
The Underlying Personal Injury Lawsuit in This Case
In the underlying motor vehicle accident lawsuit which prompted the bad faith lawsuit filed in federal court that produced this win for California consumers, the plaintiff, Gregory Harman, was injured in a car accident caused by an underinsured motorist. This is, unfortunately, all too common on California’s roads; many California motorists either do not carry the state-mandated amounts of required automobile liability or instead carry only the minimum $15,000 per person/$30,000 per accident coverage required under California law. Indeed, according to the most recent statistics from the Insurance Information Institute, 13.0% (or one in eight) California drivers were uninsured in the year 2015. However, this minimum coverage amount is often insufficient to cover the damages suffered by someone in the average motor vehicle accident in California. Harman was injured and he settled his claim with the other driver’s insurer for $15,000. Because his damages were greater than $15,000, he then turned to his own insurance policy, which included underinsured/uninsured motorist coverage.
Harman demanded a settlement in the sum of $674,525 from his insurer, Golden Eagle Insurance Company. Golden Eagle refused to make any settlement offer in response. After months of delay, Golden Eagle finally made an unreasonably low offer. Harman and his attorneys then litigated the case all the way through to an arbitration. At arbitration, Harman’s attorneys won an arbitration award of $676,546, more than $2,000 above the initial demand. After this arbitration proceeding, Harman then filed a bad faith lawsuit against Golden Eagle in federal court, which produced this decision.
The Practical Effect of This Decision for California Consumers
This decision sets forth a new, more consumer-friendly precedent for California consumers by allowing them greater access to insurance claim information from their insurers in scenarios where an insurer may not have lived up to its duty under California law to investigate claims fully and fairly. This decision narrowed the scope of what an insurer can claim is protected from discovery by the policyholder in a bad faith lawsuit under a legal protection that is known as the litigation privilege, and specifically ruled that this privilege is not as expansive as this particular insurer attempted to claim, which allowed the consumer to obtain additional information from the insurer regarding his claim. In essence, the court ruling prevents insurance carriers that cause unnecessary delays, fail to properly investigate claims, or make unreasonably low settlement offers from hiding behind the mediation and litigation privileges to avoid claims brought about as a result of their bad faith tactics.
Contact JT Legal Group if You Have Been Injured and An Insurer is Acting in Bad Faith in Relation to Your Personal Injury Claim
If you have been injured in a personal injury scenario or you were unlucky enough to be involved in an accident with an uninsured or underinsured driver like Gregory Harman was and your insurer or the other insurer is being unreasonable in its handling of your personal injury claim, contact the experienced California personal injury lawyers at JT Legal Group at (888) 529-3111 or [email protected]. Our experienced personal injury attorneys have experience in dealing with all different types of personal injury scenarios, from motor vehicle accidents to slip and fall incidents and everything in between, including bad faith lawsuits against insurers. Contact us today for a no cost consultation regarding your situation and your options under California law.
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