In addition to his more famous accomplishments, Benjamin Franklin is considered the father of firefighting—by creating fire brigades—and he also created fire insurance. But in the centuries since, his approach to helping people protect against future loss (ironically) seems to have gotten lost along the way.
Instead, too many insurers consider just payouts as a loss for them. And that’s leading them to reject legitimate claims.
You’re entitled to have the insurance company cover your claims. That’s just as true if you are a homeowner or car owner, a business, or a patient needing medical care. And if your insurer is failing to honor your policy, you may be entitled to compensation for a bad faith denial.
Basic Elements of a Bad Faith Denial Case
Generally speaking, insurers are under a “good faith” duty to honor their contract with their clients, i.e., their insureds. In other words, insurers are supposed to act in a reasonable way to honor their contract. So you can think of a bad faith claim as just a variation of a breach of contract lawsuit.
From that perspective, a plaintiff needs to show:
- they have a valid contract with the insurance company
- the insurer had a duty to fulfill the contract
- the insurer did not fulfill that duty in some way
- the insurer’s failure damaged the plaintiff
Bad faith denial cases usually come down to one of the following scenarios:
- The insured filed a claim, and the claim was denied outright.
- The insured’s claim was accepted, but the payout was only a fraction of what they should have received.
- The insurer refused to cover the insured’s expenses for a lawsuit related to a covered claim.
For clarity, the above examples describe “first party” claims when the insurer refuses to honor the insured’s need for compensation. But bad faith claims can also cover when an insurer refuses to honor claims under a policy that a third party makes. For instance, say that a homeowner has a policy that covers any injuries of those who visit their home. Then, a worker is injured while working on the homeowner’s property. The homeowner’s insurance company refuses to cover the worker’s injuries, so the homeowner pays for the worker’s expenses out-of-pocket and later sues for a bad faith denial.
What Kind of Things Suggest A Bad Faith Denial
Arizona law sets out minimum standards of behavior that insurers must fulfill when deciding whether to pay or defend a claim. Therefore, here are some red flags that suggest you may have a bad faith claim:
- If an insurer misrepresents pertinent facts or insurance policy provisions when explaining a claim decision
- If an insurer fails to acknowledge or respond to your communications about a claim.
- If they don’t have a policy on how they will reasonably investigate a claim before they’ve made a reasonable investigation.
- If they refused a claim before they’ve made a reasonable investigation of the facts
- If an insurer doesn’t decide on a claim within a reasonable time
- If an insurer makes a payment for the claim without explaining why they decided on the payment amount
- If an insurer delays payment saying they need more (duplicative) proof of the claim
Insurance companies can also act in bad faith during settlement negotiations. Some examples of bad faith denials relating to settlements include:
- When an insurer accepts a settlement without telling the insured
- When they pressure a client to accept a settlement that is far less than the client believed they’d received from the insurance company’s advertisements and promotional materials
- When they pressured their insured client to accept a settlement that is far below what the client ultimately received during a lawsuit
What Damages Can You Receive for a Successful Bad Faith Claim
Arizona plaintiffs can receive more in damages for a bad faith claim than they could elsewhere in the nation. (Some states have statutory caps on what plaintiffs can receive.) In Arizona, a successful plaintiff may receive:
- The correct payout for the policy
- Excess damages
- Consequential damages
- Punitive damages
- Attorneys’ fees and costs
All told, the successful plaintiff can walk away with far more than they would have received if the insurer had just paid the fair amount in the first place.
In addition to the proper payout, plaintiffs can receive compensation for any losses related to the bad faith denial. For example, if a homeowner had to use credit cards to pay for housing repairs the insurer should have covered, the insurer would have to pay any interest and fees related to those expenses.
If a car owner involved in an accident decided to sue a third-party driver for damages, but their insurance company refused to represent them, the cost of that lawsuit (including attorneys’ fees) could be consequential damages. In addition, the plaintiff could be entitled to the attorneys’ fees they’d spent in a second lawsuit when they later sued the insurer for bad faith.
In extreme cases, a plaintiff may also receive punitive damages.
Arizona has a high standard for punitive damages. Punitive damages are only granted if there’s clear evidence that the defendant acted with an evil intent, willful or wanton disregard for the wellbeing of others. But in the context of bad faith insurance litigation, an insurer can be liable for punitive damages when they made a decision refusing to pay or defend, with a conscious disregard for their insured rights’.
If your insurer has made a bad faith denial of your policy or is giving you unfairly low compensation for your claim, you’re entitled to compensation. So contact our office (by phone at: 602-548-3400). We will happily schedule an initial confidential consultation with one of our attorneys. We’ll give you some ideas on your case and your options for recovery. Because it’s your money. Not theirs. Don’t wait. Call today.
Scott David Stewart is an attorney in Phoenix, Arizona. Mr. Stewart’s personal injury practice division focuses on dog bite, motorcycle accidents, truck accidents, auto accidents and general injury claims.
