What are Some Examples of Insurance Bad Faith?
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UPDATED: Jul 16, 2021
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While each situation is different, the examples below will give you an idea of what can constitute insurance bad faith. If you are having similar experiences or you think your insurance company is acting in bad faith, you should contact an experienced insurance bad faith attorney for help.
- Auto insurance bad faith: The accident that happened to Florida resident John Clements could have happened to anyone. According to news reports, Clements was simply clearing leaves from his front lawn when a truck jumped the curb and hit him. He sustained a broken neck, brain hemorrhages and herniated disks, and was hospitalized for nearly a week. While the experience itself was bad enough, what happened next was even worse.Clements received some money from the driver’s insurance company and then submitted a claim to his insurance company – Allstate. Although Allstate was required under law to pay him $100,000 in underinsured motorist coverage, it ignored his claim altogether. Clements sued Allstate for bad faith and was awarded $8.2 million in damages.
- Liability Insurance Bad Faith: Harold Bostick, a 39-year old former Marine with degrees in chemical engineering and business who had just started law school at Pepperdine University, had his world turned upside down after faulty gym equipment broke and left him a quadriplegic.Bostick sued both the equipment manufacturer and the gym for his injuries and alleged that the equipment did not contain the safety straps needed to avoid injury. He offered to settle with the equipment manufacturer, but the manufacturer’s insurance company – Atlantic Mutual – ignored his offer. The case went to trial and Bostick was awarded $11.3 million for the manufacturer’s part in his injuries and for the insurer’s bad faith practices.
- Disability insurance bad faith: Teri Powell was a high school teacher in Rapid City, South Dakota for more than 25 years. She became very ill in 2002, developing rheumatoid arthritis, osteoarthritis, progressive joint disease, spinal scoliosis and various other ailments, and was forced to retire from teaching.Although she had disability insurance with CUNA Mutual Insurance Society, she tried to support herself by pet sitting and doing whatever other odd jobs she could do with her disabilities . She learned that she had cancer in 2005 and finally filed a claim with CUNA. However, CUNA denied her claim and that it needed to investigate whether she really was disabled, and then did nothing. Even though Powell followed up repeatedly, CUNA ignored her requests until she died in 2006.
Powell’s estate sued CUNA for bad faith and a jury awarded the estate $6.2 million in damages, some of which was for punitive damages against the insurance company. During the trial, her bad faith insurance attorney discovered that CUNA was treating other policyholders the same way and, by doing so, exposed a long history of fraudulent claims practices.
- George Deloyce Blewer sustained serious injury when a shotgun accidentally discharged, wounding his left hand. His insurer unreasonably delayed the payment of benefits claiming that any gunshot wound was suspect because of coverage exceptions for intentionally self-inflicted injuries and that it had not been given a requested police report. Mr. Blewer hired an insurance bad faith attorney and sued for bad faith. The court ruled in favor of Mr. Blewer and awarded penalties and attorney fees because the statement of claim submitted by Mr. Blewer clearly noted that the injury had resulted from a hunting accident. The insurer had offered no evidence of any attempts to confirm that statement other than its request for a nonexistent police report.
- Homeowners Insurance Bad Faith: A failure to sufficiently investigate a claim or an improper investigation can give rise to a bad faith insurance claim. For example, an insurer closes the file without investigating a homeowner’s claim for water damage due to a burst pipe because it believes the homeowner association, not the homeowner, is the insured party. In this situation, the insurer should have determined which party was actually covered. In addition, an insurer’s overzealous or intrusive investigation can amount to bad faith.
- Fire Insurance Bad Faith: If an insurer delays paying a legitimate claim, it may constitute bad faith. For example, a one-year delay between investigation of a fire in an insured’s home and denial of the claim when evidence about the cause of the fire was available earlier and the insured cooperated in the investigation, could be considered bad faith.