pursuing insurance bad faith claims over personal injury claim...
TRANSCRIPT
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Presenting a live 90-minute webinar with interactive Q&A
Pursuing Insurance Bad Faith Claims
Over Personal Injury Claim Delays,
Denials and Low Ball Offers Considerations and Best Practices for Proving Bad Faith and Maximizing Damages
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
THURSDAY, OCTOBER 8, 2015
Scott Glovsky, Founder, Law Offices of Scott Glovsky, Pasadena, Calif.
Brian S. Kabateck, Founding and Managing Partner, Kabateck Brown Kellner, Los Angeles
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Establishing and Arguing
Bad Faith
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… IN 90 MINUTES SO BUCKLE UP!
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WHY WE BUY INSURANCE
Key to all damage arguments
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BAD FAITH – DAMAGES
Why People Get Insurance
“An insured does not seek an insurance contract seeking
profit, but instead seeks security and peace of mind through
protection against calamity. Because security and peace of
mind are the principal benefits for the insured, courts have imposed special obligations, consonant with the special
purposes . . .”
(Love v. Fire Ins. Exch. (1990) 221 Cal.App.3d 1136, 1148.)
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PIGS GET FAT HOGS GET SLAUGHTERED
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IDENTIFYING TYPES OF INSURANCE
First Party Coverage
• Involves an insured’s claim against the insurer under coverage written for the insured’s direct benefit
• Examples: Property Insurance
UI/UIM Insurance
Life, Health & Disability
Third Party Coverage
• Provides coverage for liability of the insured to another
• Examples: General Liability
Professional Liability
D&O Liability
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3 PRIMARY AREAS OF DAMAGES
Contract Damages
Bad Faith aka Extra-Contractual Damages
Punitive Damages
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CONTROL CLIENT EXPECTATIONS
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CONTRACT DAMAGES IN GENERAL
A contract claim limits the insured to contract remedies only, i.e., unpaid policy benefits
Threshold Questions:
1) Was there a breach?
This is the gateway to bad faith and its damages
2) How was there a breach?
i. Insurer denies that coverage is owed
ii. Insurer pays only some of what is owed
iii. Insurer pays but only after delay
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ESTABLISHING BAD FAITH
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WHAT IS “BAD FAITH”?
Unreasonable
vs.
Negligence
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RULES OF THE ROAD
Insurance Special Relationship
• Business of insurance is highly specialized, with members particularly vulnerable and dependent on their insurer
• Must deal fairly and in good faith with its insureds - this is not an adversarial process.
• Must treat its insureds’ interests equal to its own interests
• Must make claims decisions without regard to profit.
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BAD FAITH – IN GENERAL
• For an award of bad faith damages, the insurer must
have acted in bad faith, i.e., unreasonably or without
proper cause
• The insurer is not a fiduciary but “must give as much
consideration to the welfare of its insured as it gives to
its own interests”
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GENERAL BAD FAITH DAMAGES
1) Economic Harm
All economic loss that the insured suffered as a result of the insurer’s bad faith conduct
2) Attorneys’ Fees
Attorneys’ fees incurred by an insured to compel payment of benefits due under an insurance policy Brandt v. Superior Court (1985) 37 Cal.3d 813
3) Emotional Distress
Available in first party cases (insured must be a natural person), must demonstrate “Articulable Harm”: the story of what (bad things) happened to the client
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ESTABLISHING BAD FAITH UNREASONABLE CONDUCT
Admissible evidence to show an insurer acted unreasonably –
no single factor is conclusive but tends to establish “unreasonable” conduct:
• Failure to investigate claim thoroughly
• Failure to evaluate claim objectively
• Using improper standards to deny claim
• Unreasonable delay in payment of claim
• Dilatory claims handling
• Failure to attempt settlement
• Use of abusive tactics
• Violation of the Unfair Insurance Practices Act (Cal. Ins. Code § 790.03)
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• Must fully, fairly and thoroughly investigate
before a denial
• Fairly and objectively- must diligently look for evidence
to support coverage
• Thoroughly - cannot deny based on insufficient
information.
INVESTIGATION
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RULES FROM STATS/REGS
• Unfair Claims Settlement Practices • (California Ins. C. § 790.03(h))
• Misrepresenting to claimants pertinent facts or insurance policy provisions
• Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims
• Failing to affirm or deny coverage of claims within a reasonable time
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• Not attempting in good faith to effectuate
prompt, fair, and equitable settlements of
claims in which liability has become
reasonably clear.
• Failing to provide promptly a reasonable
explanation of the basis relied on in the
insurance policy, in relation to the facts or
applicable law, for the denial of a claim
RULES FROM STATS/REGS
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(10 Cal. C. Regs. §§ 2695.1-14)
• Insurers must disclose to their insureds or beneficiaries “all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim…”
• Generally must accept or deny claims within 40 days after receipt, unless they advise the claimant in writing of the reasons for delay, and update the reasons every 30 days.
• Every insurer must conduct and “diligently pursue” a “thorough, fair and objective” investigation.
• No demands for immaterial information
• No unreasonably low settlement offers
FAIR CLAIMS SETTLEMENT PRACTICES REGULATIONS
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WORKING UP THE CASE
• Detailed chronology
• Discovery focused on rules of the road
• Claim file and documents regarding claim • Puzzle
• Attorney-client privilege
• Policies and procedures
• Training documents
• Colonial Life discovery
• Interview witnesses
• Research defendants
• Analyze case from perspective of defense counsel
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DEPOSITIONS
• The decision-makers (adjusters)
• Who is this person?
• Background, training and experience
• Rules of the road
• Claims handling process
• Detail their investigation – Did you “investigate”
• Why they decided to deny/delay the request
• What documents they read or relied upon before making the decision?
• Who did they talk to?
• How long did they spend on the request?
• How are they compensated? (bonuses, stock options)
• Punitive damage questions
Side note:
Never “set up” insurance companies
for bad faith.
They are capable of it all on their own.
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TRIAL STORY OF THE INSURER
Trial Themes
• Promises and lies - trust and betrayal
• Policyholder bought peace of mind
• Insurance is a different type of business
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1ST PARTY COVERAGE PROPERTY INSURANCE
Bad Faith Damages
• The insurer wrongfully denies a claim based on a “policy exclusion” or a “non-covered peril”
• The insured’s policy covered water damage but not mold.
The insurer’s bad faith delay or denial of payment for water damage allowed mold to form. The insurer will be liable for the
mold and other losses.
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1ST PARTY COVERAGE PROPERTY INSURANCE
Bad Faith Damages
• The insurer becomes liable for pecuniary loss that arises from the delay
or denial, even if the loss was not originally covered under the policy
and whether it could have been anticipated or not
• Additional uncovered work to the home
• Living expenses
• Rent for temporary housing
• Mileage for increased traveled from temporary home to work
• Cost of fencing to secure damaged/destroyed house
• Cost of repairing/refurbishing personal items recovered
• Pet boarding cost and increased veterinary bill due to
illness/injury resulting from the loss event
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1ST PARTY COVERAGE UM/UIM
Facts
• An UM/UIM policyholder makes a claim for which liability of the underinsured motorist is clear and the damages are
clearly in excess of the underinsured motorist’s policy limits,
and the insurer refuses to pay
Facts to Consider
• Binding arbitration
• You will not exceed policy limits in UM/UIM
• The insurer can be liable for all articulable harm, attorneys’
fees, and cost of arbitration
• Damages insured sustained due to delayed payment
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1ST PARTY COVERAGE ARTICULABLE HARM STANDARD
Use the Articulable Harm Standard
How did the failure to pay UM/UIM benefits hurt
the insured?
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1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY
Life Insurance
• Insurer contends that the medical condition was
present at the time of application and not
disclosed and then denies benefits of policy
Bad Faith Damages
• Economic Harm
• Burial Expenses
• Foreclosure
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Health Insurance
• Failing to authorize necessary medical treatment entitled to, claiming that the treatment is not medically necessary
when the insured’s own treating doctors say it is
• The insurer may be liable for exacerbating insured’s health
for failure to provide policy benefits when due, or even
death
Bad Faith Damages
• Cost of health care – not capitated rate
• Worsened condition/death
• What the family had to incur to pay medical expenses
1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY
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1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY
Disability Insurance
• Insurer contends that the insured’s medical condition
does not prevent him from performing his job
Bad Faith Damages
• Economic Harm
• Loss of home, car, etc.
• Loans
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1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY
Beware of ERISA
The Employee Retirement Income Security Act (ERISA) preempts
many areas of state law regarding suits for employee benefit
plans, including life, health, and disability insurance.
Insured can only recover amount of benefits wrongfully denied,
plus attorneys’ fees at the court’s discretion.
ERISA exemptions: government and public agency employees,
church employees, employees whose employer only collects funds and does not endorse the program.
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3RD PARTY COVERAGE
The Duty to Defend
vs.
The Duty to Indemnify
The Duty to Defend is broader than the Duty to Indemnify
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SCENARIOS & EXAMPLES 3RD PARTY COVERAGE
The Duty to Defend
• Wrongful failure to defend opens the insurance carrier to liability for the whole amount of the judgment, including
any amount in excess of the policy limits
The Duty to Indemnify
• The insurer is liable only for the damages that flow from the failure to indemnify
The Duty to Settle
• Liability insurer has a duty to settle third party claims within
policy limits when liability is reasonably clear
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PUNITIVE DAMAGES
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GOAL
• Malice
• Oppression
• Fraud
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PUNITIVE DAMAGES IN GENERAL
Requires a showing beyond “unreasonable”
• Show clear and convincing evidence of oppression,
fraud, and/or malice
• Constitutional limits on punitive damages (State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 438)
• In California, multiplier by 3 – 4 is the limit, absent extraordinary circumstances
(Century Sur. Co. v. Polisso (2006) 139 Cal.App.4th 922, 966.)
It is an open question whether punitive damages have to bear a reasonably relationship to all compensatory damages or just tort damages.
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BUILDING PUNITIVE DAMAGES
• Reprehensibility - most crucial factor in
evaluating a punitive damages
• Factors
• whether the conduct involved repeated actions or was
an isolated incident
• whether the harm was the result of intentional malice,
trickery, or deceit or simply an accident
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PUNITIVE DAMAGES
Plaintiff has the obligation
to prove the net worth of Defendant
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PUNITIVE DAMAGES
"In light of our holding that evidence of a defendant's financial
condition is essential to support an award of punitive damages,
Evidence Code §500 mandates that the plaintiff bear the burden of
proof on the issue. . . .These bedrock concerns—policy and fairness—
support placing the burden on a plaintiff to prove a defendant's
financial condition."
Adams v. Murakami, 54 Cal. 3d 105, 119-20 (1991).
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PUNITIVE DAMAGES Pull Annual/Quarterly Statements Online
California Code of Regulation § 2308.1
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