When an insurance company is on trial for its conduct, its best friends are "confusion, complexity, and distraction." Every argument an insurance company makes in response to a policyholder's complaints about its misbehavior is geared toward making the case as complex as possible while confusing and distracting the jury. After all, if the jury is confused as to whether the insurance company's conduct was reasonable, they will likely determine that the plaintiff has not met his burden of proof and do the easy thing...decide in favor of the insurance company. After all, the jury wants to get back to living their everyday lives. Think of "confusion, complexity and distraction" as the key to nearly every insurance company defense to nearly everything.
With that background in mind, when someone hires me to investigate and ultimately file a lawsuit against the insurance company for their misconduct in handling a claim, it is of vital importance that I know what NOT to argue. Even with all of the different tools at my disposal when suing an insurance company for bad faith, it is vital that I am careful in choosing which claims I bring. Rarely is this the time to "throw in the kitchen sink."
There are many ways to sue an insurance company that chooses to ignore its policyholder, who paid a monthly premium in exchange for the insurance company promising to pay for claims arising from a motor vehicle crash. Months and months may pass with no response from an insurance company. Finally, after an extensive letter-writing campaign on my client's part, the insurance company may finally come back with a fraction of any reasonable claim evaluation. When asked how they arrived at this anemic dollar figure they inevitably admit they had no actual basis for offering what they did.
Sound familiar? Sadly, it happens far too often. With this as background, an effective lawyer must carefully choose which tools in his arsenal will be most convincing.
THE TOOLS AT OUR DISPOSAL:
1) Breach of Contract:
When I sue, I, of course, sue for breach of contract. This is a claim that the insurance company failed to do their job as promised and asks the jury to award the value of the claim that the insurance company failed to pay, up to the applicable policy limits.
2) Consumer Protection Act claim:
This claim asks that the jury determine that the insurance company deviated from a series of fair claims handling practices. A successful claim would allow a jury to determine that a policyholder was wronged to such an extent that extra-contractual damages, up to three times the value of the loss, may be awarded. These claims, though argued often, are regularly dismissed by some courts based on some recently decided cases.
3) Unreasonable Delay/Denial - C.R.S. 10-3-1116:
This is the newest of the tools afforded to the legal practitioner. It has been available only since August 5, 2008, after being adopted by our Colorado legislature. This simple, yet powerful, enforcement statute calls upon a jury to determine if the insurance company's delay or denial in the payment of benefits to its insured was UNREASONABLE. The reasonableness, or lack thereof, of the insurance company's conduct is all that is at issue.
If the jury's answer is yes, then the statute provides that the policyholder is automatically entitled to DOUBLE the covered benefits. This statute basically provides for a penalty against the insurance company for being unreasonable.
4) Bad Faith Breach of the Covenant of Good Faith:
This claim is a mouthful. What's more, if not sparingly brought only when appropriate, it can greatly feed into the "three best friends" of the insurance company: confusion, complexity, and distraction."
This claim has two elements that must be proved in order to prevail. First, it must be proved that the insurance company acted unreasonably, just like the statute discussed above.Second, it must be proved that while it was acting "unreasonably," the insurance company knew it was doing so or recklessly disregarded its unreasonable conduct. In other words, the conduct must be unreasonable AND the insurance company must know of and, in fact, embrace the unreasonable conduct at the same time. Are you confused yet? If so, you can imagine that a jury may also get confused when evaluating whether an insurance company committed bad faith. If a jury gets confused when deciding YOUR case, it invariably means that you will lose.
In the right kind of case, a bad faith claim gives an injured plaintiff the opportunity to recover damages that resulted from the denial or delay. A great example is when an insurance company denies a claim for a surgery, the result of which permanently causes a disability, because the patient lost the window of opportunity for the care. Under this claim, a victim has the right to have the jury compute the total loss, regardless of the total limits on the policy. It also permits a jury to determine and award non-economic emotional pain and suffering damages. However, every time this claim is pursued, you run the tremendous risk of confusing the jury due to its complexity.
THE ROOT OF CONFUSION:
Between claims 3 and 4 above, there is natural confusion. One claim for relief is a simple proposition of establishing that the claims practices of the insurance company are UNREASONABLE. However, claims for bad faith, require not only unreasonableness but also proof that the insurance company knew or was reckless not to know its conduct was unreasonable. Well, what on earth does that mean?
Furthermore, imagine the insurance company attorney getting up and confusing the jury by saying "simply finding unreasonable conduct, in and of itself, is not enough." But, actually, unreasonable conduct IS enough to prove one claim of relief but not for the other. Confusing? You bet? Make no mistake, insurance companies want juries confused. They know that confused juries often throw up their hands, and sign the easiest jury verdict form (the one that gives the victim of insurance misconduct nothing).
C) WHEN TO TAKE THE RISK:
Since the advent of the new Unreasonable Delay/Denial Statute, I have been very cautious as to when I argue a bad faith claim. In the traditional denial of a claim, unless there is a permanent physical injury attributable to the denial of benefits, I view the risk of jury confusion (and the inevitable low or zero verdict) to not be worth the risk. Getting a jury to find insurance conduct unreasonable is easier than getting the jury to infer the added actual knowledge or reckless conduct. The limited gains achieved in the traditional bad faith claim simply are not worth playing into the insurance company's opportunity to "confuse, complicate and distract" the jury from the task at hand. Believe it or not, being an effective lawyer means knowing what NOT to say.
At Anderson Hemmat, we pride ourselves on thinking critically about your case, rather than using a "shotgun" style approach to pleading certain claims. If you have questions about which type of claims are most appropriate for your case, please contact us and speak with one of our attorneys today.