Delay declared “Bad faith” action on uncovered claim

With xxx, pro se v Lexington on my mind, I remembered this post from Insurance Law Hawaii. Mississippi law falls short of the protection Louisiana law provides; however, it is my understanding that insurers here have an obligation similar to Washington State’s  “respond promptly”.

the Washington Supreme Court recently held the insured could pursue bad faith claims for delay in processing the claim even when there is no coverage under the policy.  See St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., 2008 Wash. LEXIS 1055 (Wash. Nov. 26, 2008).

….the issue was whether the insured could pursue common law bad faith and claims under the Consumer Protection Act based on St. Paul’s delay in handling the claim…

It took nine months for St. Paul to deny coverage…

The suit for declaratory relief alleged St. Paul violated a number of insurance claims-handling regulations in bad faith, including failing to timely acknowledge and act upon the notice of the claim and tender of defense, and by failing to promptly or reasonably investigate the claim…

The Court decided St. Paul had acted in bad faith even though there was no coverage under its policy.

Something to keep in mind, particularly since court dates for some of the pending Katrina cases are more than a year away – and, speaking of things to keep in mind, Chip Merlin has two recent posts on claims handling.  Both are excellent and I suggest you check out What is Good Faith Insurance Claims Handling and the Rules of Good Faith Claims Handling.

2 thoughts on “Delay declared “Bad faith” action on uncovered claim”

  1. Nowdoucit,

    Thanks for the kind words.

    I wish the trial and appellate court judges would be referred to these rules. These are the same rules insurance company management recognize as good faith duties, that if repetitively broken, could lead to the dismissal of their jobs.

    In the insurance adjustment world and that of insurance treatises teaching claims practices, there is no such thing as “an arguable basis to act in bad faith.” It is a judge made rule that came about as a result of clever insurance defense attorneys aguing that insurance companies have a “right to be wrong.”

    How many other industries can breach a contract in bad faith and then claim they have a right to do so if they can come up with an arguable basis for breaching the promises of rules they agree to abide by? As a matter of public policy, if you make a promise and agree you have a duty to perform to a standard, we should not let those that break those rules and harm others to escape from accountability.

    The problem is that the Courts are often not presented with these claims adjustment rules in the cases presented before them. It would be like asking judges to determine a standard of care for doctors by reading medical malpractice cases. The Policyholder Bar, me included, has to do a better job of presenting our claims practice cases before judges that are deciding these important issues.

  2. You’re welcome, Chip, and I agree. In fact, I’m working on a post for tonight or tomorrow about a judge who just didn’t get it.

    In this case, it’s a Louisiana Judge; but, our Mississippi judges could use a little educating on some of these issues – either that or a new “friendship circle”.

    One would expect a judge with a connection to the insurance defense bar would not accept Katrina cases; but it just hasn’t happened. However, I believe a Judge who came to the bar from a firm representing insurance companies or has a spouse in that position, needs to step aside just as those who lost their homes did following Katrina.

    It just looks wrong even if it’s not – and it really looks wrong when these judges make decisions that are subject to question.

    Since I’m not a lawyer, I really just have one standard and that’s does an argument or decision make sense. A lot of these decisions just don’t – why?

    I’m interested in your take on this Louisiana case – that said, I need to run and get back to work on it. Thanks for stopping by.

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