In bad faith cases, a jury is always asked whether under the facts the carrier acted reasonably. Bad faith may consist of denying benefits, delaying payments and paying less than what is owed. An insurance company is obligated to thoroughly and promptly investigate all claims and must inquire into all the possible issues that might support an insured’s claim. This obligation is not terminated simply because the insured files a lawsuit against the company. Where an insurer makes a belated offer of settlement, a cause of action for bad faith does not correct or set aside the previous wrongful conduct. Any payments to the insured only reduce the amount of the insurance company’s final liability as it may be determined by a jury.
Every insurance contract contains an unwritten or implied term referred to as the covenant or promise of good faith and fair dealing. This is a promise imposed by law upon an insurance company to always act fairly towards its insureds in handling their claims. Judges will read the policy as if it had this implied promise, whether it is there or not. Carriers must meet the reasonable expectations of the policyholder and an insurer must always give as much consideration to the financial interests of its insureds as it does to its own financial interests.
When a person buys an insurance policy, the very risks that are insured against make it clear that if a claim is not satisfied the policyholder will suffer financial loss and emotional distress. Carriers know that policyholders will be vulnerable to their oppressive tactics, and insurance companies are presumed to know that a denial of benefits will very well result in emotional distress to their insureds.
In a bad faith action an insurance company’s business practices or common course of conduct is routinely admissible to show motive, opportunity, intent, plan, knowledge or the absence of mistake or accident in the manner in which it dealt with its insured. It is not necessary to show that the insurer intended to cause harm in a breach of the covenant of good faith and fair dealing. The policyholder need only show that the insurer failed to honor the agreement and had no cause not to pay what was due under the contract.
Duty to Deal Fairly
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