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Articles Posted in Bad Faith Insurance

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In late April, Mehr, Fairbanks & Peterson Trial Lawyers defeated Allstate Insurance Company’s motion for protective order of insurance claim files relating to a bad faith claim. In their opinion entered on April 28th, the Circuit Court held that the probative value of the documents to the Plaintiff’s case outweighed any prejudice to the Defendant, thus denying Allstate’s claim that information within the documents should be protected from discovery during the ongoing litigation.

The case at issue arose after an automobile accident occurred in Tennessee. The parties reached a settlement for bodily injury claims, though the injured party subsequently filed suit for Underinsured Motorist (UIM) coverage in Kentucky court. The Plaintiff later moved to amend their complaint to include claims against Allstate for bad faith and Unfair Claims Settlement Practices. After this motion, the Plaintiff moved to compel discovery of Allstate’s complete copy of their insurance claim file. This motion was granted, and Allstate ordered to comply within 30-days. Allstate then moved for a protective order of the documents, stating that they should be shielded from discovery under both the work product doctrine and attorney-client privilege. The work product doctrine requires that documents that have been prepared by legal counsel in preparation for litigation should not be discoverable by the other party, as it would provide an unfair edge to opposing counsel. Attorney-client privilege protects the private information shared between an attorney and their client from discovery.

Since the discovery request relates to the bad faith claim against Allstate, the Court must make several considerations when determining whether to grant a protective order. First, the Court must classify the bad faith claim by determining whether it is first- or third-party. First-party bad faith claims occur when “the insured sues the insurer for failing to use good faith to resolve the insured’s claim.” The Court concludes that the current claim falls into this category, as it “concerns a claim between an insurer and its insured.” Next, the Court must consider whether any privilege exists which could exclude part of the requested document from discovery, though not its entirety. Here, the Court looks to established case law stating that, “attorney-client privilege and work product doctrine are generally inapplicable in first-party bad faith cases.” The Court states that even if the claim file includes information that is work product or is protected by attorney-client privilege, in this category of cases, “discovery of the entire claim file is appropriate.”

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The Court of Appeals for the Fourth Circuit recently held that under ERISA, the “deferential review” standard is not a one size fits all seal of approval for plan administrators’ reasoning in denying claims. The case giving rise to this decision is Garner v. Central States and Southwest Areas Health and Welfare Fund Active Plan in which the Defendants denied the Plaintiff’s claim for the reimbursement of medical costs related to their back surgery. A court in North Carolina provided the original ruling in the case (later upheld by the Court of Appeals) that the plan at issue had “abused its discretion” in denying the claim.

The case boiled down to two significant issues relating to the determination that benefits would be denied, each addressed by the Court of Appeals. The first relates to the omission of an MRI scan in the documents to be analyzed by the first reviewing doctor in making their decision on the availability of benefits. This omission was held to be significant, as the results of the MRI were crucial to the Plaintiff’s treating doctor’s decision to operate. Secondly, no notes from the Plaintiff’s treating doctor relating to the decision to conduct surgery and discussion of the MRI were provided to the reviewing doctor.

The Plaintiff’s initial appeal was denied on the grounds that a second reviewing doctor had reached the same conclusions as the first. Thus, according to the Defendants, the lack of information provided to the first doctor did not preclude denial. The Court disagreed with this argument, stating that the issues with the first doctor’s review were not cured by the concurrence of the second doctor, as their opinion also misstated facts surrounding the Plaintiff’s need for surgery. As a result, the Court held that the Defendants’ denial of the claim was not “the result of a deliberate, principled, reasoning process.”

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Recently, an 11th Circuit Court in Florida held that when a private settlement constitutes an “excess judgment” under an insurance policy, the insured(s) can use the amount in the settlement to bring a bad-faith claim against their insurer. This decision overturns a previous 2019 decision (which was unpublished) stating that the only method through which insureds could establish a bad-faith excess judgment claim was after the case had reached a jury verdict at trial. The insureds in this case are now able to bring suit against their insurer, Geico Insurance, for allegedly agreeing to a settlement in excess of policy limits.

The policy at issue in this case was an auto insurance policy that gave coverage for up to $100,000 (per person) for bodily injury. The insureds under the policy were at fault in an accident, causing serious bodily injury to the other party, the costs of which exceeded the policy limits. When the parties could not reach an agreement during settlement negotiations, the injured driver sued the insureds in Florida state court. The insureds were then provided with counsel by Geico for the duration of the suit, as was dictated by their policy. The parties eventually reached an agreement in the form of a settlement, but the amount agreed upon drastically exceeded the policy limits. The terms of the settlement delineated that one of the insureds (the owner of the vehicle involved in the accident, but not the driver at the time) would pay to the injured party $474,000. This amount is small compared to the amount the settlement required of the at-fault driver, which came out to $4.47 million. The settlement also included that  Geico would agree to not hold the insureds in breach of the policy through acceptance of the offer.

Florida state law provides that insureds may bring bad-faith insurance claims when the insurer grants an “excess judgment,” meaning that the insurer (in bad-faith) chose to accept a settlement agreement that exceeded policy limits. Under this principle, the insureds filed a claim against Geico, requesting damages amounting to the total agreed upon in the settlement that was over the $100,000 policy limit. Prior to this decision, the case against Geico would have been dismissed since the excess judgment was not award through a jury verdict after trial. Judge Kevin C. Newsom disagreed with this precedent, as his opinion on the matter stated, “a jury verdict is not a prerequisite to an excess judgment in a bad-faith action.” Judge Newsom’s reasoning relies on Florida state law, reiterating that when insureds are, “subject to excess judgments, they [can] prove causation in their bad-faith case.” Further, Judge Newsom states that previous opinions in lower courts which had relied on the older decision may not have properly interpreted the state law. He states that the reliance on the precedent was caused through a misinterpretation of another previous case in which a jury verdict happened to be present, which should not have resulted in a requirement that a jury verdict must exist in all cases.

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In 2020 more than ever, the risk of interrupted travel plans loomed for those seeking to spend time and money planning trips in an uncertain world. With the Covid-19 pandemic an ongoing source of disruption for travelers across the globe, the decision to seek insurance coverage for trips was, and remains to be, justified. But what if the insurer doesn’t hold up their end of the deal? A federal court in New York is preparing to hear such a case in Seibel v. National Union Fire Insurance Company of Pittsburg, PA et al. This case concerns travel insurance policies bought by the Plaintiffs, who are alleging that the insurers overcharged on certain pre-departure and post-departure bundled plans by not reimbursing the “unearned portion of premiums” on trips that had been cancelled.

The suit was filed by the named Plaintiff, Nicholas Seibel, on behalf of a class including other individuals who held travel insurance policies with the Defendants, and were allegedly improperly required to pay premiums due to the policies’ failure to distinguish between pre-departure and post-departure coverage plans. This class is stated to be over 100 members, all purchasers of “lump-sum travel policies.” There is an additional subclass, asserting violations of Pennsylvania state law, specifically the Pennsylvania Consumer Protection Act. In the main case at issue, Seibel alleges that the Defendants routinely charge policy holders for all-inclusive travel insurance plan premiums, then subsequently refuse to reimburse any portion of the premium costs that were not earned. In fact, these premiums were impossible for the policyholders to earn due to cancellations occurring before the chance to depart.

Seibel had purchased two policies from the Defendants, one for a 10-day trip to Paris and one for a 5-day cruise to Miami. The Paris trip cost over $29,000 (as it was Seibel and four other travelers), and was cancelled in August of 2020, two months before the proposed departure date (intended to be in October, 2020). Each policy respectively provided the same pre- and post-departure coverage, the former including a promise of reimbursement for “non-refundable deposits” upon the cancellation of a trip before departure. The post-departure coverage included provisions for reimbursement for interruptions of the trip, medical emergencies, and the loss or theft of baggage. Essentially, Seibel argues that since premiums are paid to cover risks that may take place post-departure, if said departure never occurs, the insurer should be required to refund the amount of premiums paid on the policy. The Plaintiffs’ complaint further alleges that the policy does not include any provision for how to deal with the reimbursement of unearned premiums that have been pre-paid by the policy holder and qualifies the areas that are covered under a provision as “indemnification for travel related perils.”

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When a policy contains a “cost of making good provision,” is an insurer able to wholly deny coverage falling under its purview, even if it just applies to a small part of the claim? This question was recently brought to the Central District Court of California in The Haven at Ventura, LLC v. General Security Indemnity Company of Arizona, et al. In this case the Plaintiff, Ventura, brought suit against the Defendant, General Security, alleging an improper denial of benefits under a $69 million “builders risk policy.” The underlying circumstances giving rise to a claim for coverage in this action began in September of 2020, and concern mold damage to new, incomplete buildings on the Plaintiff’s property. After expert evaluation, it was determined that the buildings needed “detailed remediation,” a request for the cost of repairs subsequently filed with the Plaintiff’s insurer. During this period, the correction of the damage sustained caused the opening of the residential property to be delayed, thus resulting in additional financial damages to the Plaintiff. The claims brought by the Plaintiff under the builders risk policy included “faulty workmanship” and “excluded dampness of atmosphere.” Coverage was subsequently denied by the named Defendant and several other involved insurance providers.

The Plaintiff states that multiple attempts were made to avoid the process of litigation, but upon the inability to come to an agreement, they felt it necessary to file suit. The Plaintiff brought their claim against the Defendants for breach of contract and is asking the Court for upwards of $5 million as a result of the loss of income from their inability to collect rent during the period that the damaged buildings were undergoing repairs. An interesting aspect of this litigation is the novelty of the “cost of making good provision” at issue in the policy, as it is not yet as common in the United States as in foreign courts in Europe and Canada. This kind of provision essentially requires the insurer to cover the costs of making a covered property “good” or in other words, back to its original condition after damage as occurred. The Plaintiff’s argument relies on the intent and purpose of such a provision, and states that a complete denial of coverage is in opposition with the intended results of its inclusion in the policy. The Plaintiff further argues that in order to determine how the “make good” provision should be interpreted the Court should look to the example set by countries that have applied them for decades. The Plaintiff asserts that under this method of interpretation, their argument that the “make good” provision did not apply to the entirety of the claim and thus cannot be relied upon to deny the claim in full must prevail.

Counsel for the Plaintiff states that an argument blaming “damp atmosphere” for the mold damage is not based on adequate evidence, and thus the Defendants’ assertion that this was the underlying cause of the mold damage is incorrect. Further, the Plaintiff contends that the relevant provision applies to damages from “faulty workmanship” taking place directly adjacent to a loss, and not the kind of damages at issue in this circumstance, therefore the Defendant’s justification for denial under the “make good” provision is invalid. The Defendants have not yet responded to the allegations, though the next steps in this case will undoubtedly be cause for attention due to the novelty of the provision at issue.

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Health insurance companies are supposed to protect their policyholders by providing financial protection and reimbursement against losses. They collect premiums from their clients over a period of time to pay for future losses. When a person buys an insurance policy, they are entering into a contract. This contract is expected to be upheld and followed even when unexpected accidents and expenses occur. There are laws set in place to help and protect policyholders from health insurance companies when they wrongfully deny coverage to their insured. Read on to find out how you can identify the signs of wrongful treatment and how to protect yourself.

What Should Health Insurance Companies Cover

This list does not include all the possible items and instances of coverage. To see a full list of items that should be covered by your insurance company, take a further look into the details of your health insurance policy. The list below includes major services that should be covered under basic policies:

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The cases below, while all turning a year older this week, are still relied upon to defend insured members whose claims are handled unfairly by their insurance companies.

November 17, 1988

State Farm Mut. Auto. Ins. Co. v. Reeder, 763 S.W.2d 116 (Ky. 1988). Twenty-one years ago this month, the Kentucky Supreme Court dramatically leveled the playing field against insurance companies by their decision in this case. In this case, Reeder lived next door to the Hamptons, whose teenage son accidentally drove his car into the support for Reeder’s car port, which then collapsed. Reeder estimated the damages were $13,000, but Hampton’s insurance carrier, State Farm, refused to pay. Reeder, unsatisfied with State Farm’s offer, sued them to collect the full amount, for his attorneys’ fees and for punitive damages for violating the Unfair Claims Settlement Practices Act law.

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HAPPY BIRTHDAY to the Unfair Claims Settlement Practices Act! Thirty-five years ago today, our Kentucky state legislators met and voted UNANIMOUSLY to pass the Unfair Claims Settlement Practices Act.

This law leveled the playing field for all citizens of the state against insurance company claim practices.  No longer could insurance companies leverage the unequal bargaining position they had against someone financially distressed because a terrible event had occurred in their life. No longer could insurance companies take advantage of the immediate need for money that stems from accidents, deaths, disability and life‘s tragedies! It put an end to insurance companies delaying claims unreasonably until they can save money.

The fight continues at Mehr, Fairbanks & Peterson to enforce these laws and to stop insurance claim abuses. There continues to be inappropriate motivations and lack of training of claims personnel to, first and foremost, be fair and prompt in claim payments.

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While finalizing the purchase of a home, it is important to get as much information about the offer as possible. This includes insurance coverage, what is included in the acquisition, and what the buyer is accountable for with the house. If the realty agent, broker or loan provider lied or misled the buyers, this could result in a civil suit against the company or the individual.

If you or anyone you know in Lexington believe to have been duped in the purchase of the property, one of the best options you may get is our Lexington insurance attorneys at Mehr, Fairbanks & Peterson Trial Lawyers.

Can I Sue My Realtor For Not Being Honest?

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When somebody acquires a home, it is recommended to likewise obtain a comprehensive insurance policy for a myriad of protections. A policy could shield from fires, floods, theft, as well as comparable concerns. Nevertheless, it is critical to know what sorts of security are not provided in these types of coverage too.

If there is a requirement for additional insurance, it should be bought, yet the policy has to be understood, or it is feasible, to get an insurance provider where gaps may exist such as smoke or fire damages or theft of just particular goods. Standard insurance coverage might not be suitable for particular areas around the USA.

The standard policy that a new homeowner purchases usually covers whatever he or she may think about, however, this is not always sufficient based on what may go wrong. The theft policy may only cover small products such as radios, books, as well as digital gizmos, but the larger purchases may be exempt from this policy. Vandalism generally covers any type of damage, however, if theft is not part of the deed, anything stolen may not be compensated. Weather condition may include fire, wind, lightning, and similar problems, yet it may not cover flooded areas with extensive rains. And also, there are times when other issues occur that the homeowners may not have thought can happen in his or her place.

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