As a policyholder, you pay your insurer for security and peace of mind. If you are determined to be “at-fault” in an accident or other incident that causes someone to suffer injury, you expect your insurer to pay any damages covered by your policy. When an insurer unreasonably refuses to pay your claim, accept liability or defend against a claim of others, they may be operating in what is known as “bad faith”.
Implied in every contract (including insurance contracts) is the “implied covenant of good faith and fair dealing.” Essentially, this means that an insurer must deal with you fairly, as a reasonable person would in the investigation and processing of an insurance claim. In both Georgia and California, this includes, among other things, an insurer’s:
Duty to fairly and promptly adjust the loss or claim. O.C.G.A § 33-4-7(a) et seq; Cal. Ins. Code § 790 (h) et seq.
Duty to make a reasonable effort to investigate and evaluate the claim. O.C.G.A § 33-4-7(a) et seq; Cal. Ins. Code § 790 (h) et seq.
Duty to make a good faith effort to settle the claim where liability is reasonably clear. O.C.G.A § 33-4-7(a) et seq; Cal. Ins. Code § 790 (h) et seq.
Duty to offer a reasonable settlement amount after liability has become reasonably clear. O.C.G.A § 33-4-7(a) et seq.; Cal. Ins. Code § 790 (h) et seq.
Duty to accurately state relevant facts and insurance policy provisions relating to the claim at issue. Cal. Ins. Code § 790 (h) et seq.
Duty to not delay the investigation of claims by requiring claimants to submit a preliminary claim report and other proof of loss forms containing substantially the same information. Cal. Ins. Code § 790 (h) et seq.
Georgia and California courts have stated the following:
"An insurance company may be liable for damages to its insured for failing to settle the claim of an injured person where the insurer is guilty of negligence, fraud, or bad faith in failing to compromise the claim. In deciding whether to settle a claim within the policy limits, the insurance company must give equal consideration to the interests of the insured.” Southern General Ins. Co. v. Holt, 262 Ga. 267, 276 (1992).
“The law implies in every contract, including insurance policies, a covenant of good faith and fair dealing. The implied promise requires each contracting party to refrain from doing anything to injure the right of the other to receive the agreement's benefits. To fulfill its implied obligation, an insurer must give at least as much consideration to the interests of the insured as it gives to its own interests. When the insurer unreasonably and in bad faith withholds payment of the claim of its insured, it is subject to liability in tort.” Maslo v. Ameriprise Auto & Home Ins., 227 Cal.App.4th 626, 633 (2014).
Analysis: Generally, many insured policy holders believe that their personal and financial interests are protected simply by holding an active liability policy with their insurer. What many
fail to realize is that when either a first party or third party claim is asserted against an insurer, a clear conflict of interest is present. It is at this point where an insurer and insured’s financial interests diverge. For instance, an insured desires a pre-litigation resolution of the matter within the policy limits, amicable settlement negotiations and other conduct that would not subject them to personal responsibility for an excess judgment at trial.
On the other hand, a majority of insurers would rather place their own financial interests ahead of their own insured. Thus, their intention is to pay out as little as possible or even nothing. This may include conduct such as denying responsibility of claims where liability is clear, delaying the investigation or resolution of claims or other unreasonable conduct to prevent an amicable pre-litigation resolution within the policy limits. This conduct benefits the financial interests of the insurer at the expense of their own insured giving rise to what is known as potential “bad faith” liability.
As Plaintiff’s lawyers, it is our job to highlight this conflict of interest for our clients as well as those who are insured (including the “at fault” insured). It is important for us to bring awareness
to these issues for all to understand the roles and responsibilities that are at play when an insurance claim is asserted. In the case of a claim where liability is clear and an insurer denies liability, it is our responsibility to notify the insured of their insurer's conduct and how that conduct may place the insured in jeopardy of being held personally responsible for an excess verdict at trial. This notice is not intended to frighten or scare the insured. Rather, it is to document and inform the insured of the unreasonable conduct of their own insurer who is supposed to protect their interests when they need it most. It is also intended to help the insured realize that their insurer may not have their best interest at heart (even though the insured may be under the impression that their insurer is doing all they can to protect their interests).
Conclusion: It is important for insureds to be aware of the roles and responsibilities that are at play when an insurance claim is asserted. Everything is not what it seems. At the core, always understand that insurance is a business and an insurer will prioritize its own financial interests at the expense of its own insured. The insured’s interests are secondary. Once you are aware of this conflict, you (as an insured) can advocate against this conduct by voicing your desires to your insurer. This may include your
desire to have the claim settled amicably in pre-litigation, not subject you to an excess judgment at trial due to your insurer’s unreasonable conduct or failure to engage in reasonable settlement negotiations. If necessary, remember that you as the insured have a constitutional right to hire an attorney (independent of the insurance company) that will advocate for your own self interest while combating any unreasonable conduct of the insurer.
Footnotes:
(1) A person files a first party claim with his or her own insurance company. A third party claim is filed against the insurance of a party who was at fault in the incident. Third party claims are also known as liability claims.
(2) “At fault” means a person that is responsible for a particular situation.
Sources:
Disclaimer:
This content does not create an attorney client relationship. Content is provided for informational purposes only and does not constitute legal advice. In the event you require legal advice or counsel, please contact a licensed attorney in your respective state. Chris Allen is a licensed attorney in Georgia and California.
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