Insurance
Bad Faith“What an insurance agent says is also
a contract whether it is written in the contract or not. Even if it is just the
agent’s interpretation. There could also be punitive damages involved in
any lawsuit against an insurance company.” When
a small or medium sized company suffers a catastrophic business loss, such as
a fire or hurricane, its bargaining power against its property and casualty insurer
is virtually nil. Loss of inventory, for example, can result in death of the business
if not replaced promptly and fairly. Insurance companies know this, and often
take advantage.
Insurance
Companies are NOT in the Business to Lose Money
When
a loss occurs, the language of the insurance contract becomes crucial. All insurance
policies include an implied obligation which applies to the insurance company
“of good and fair dealing” toward the policyholder. Look closely at
the language of the policy. What type of losses does it cover? What property is
covered exactly? What are the ancillary coverages that the policyholder can invoke
that may be obscure such as valuable papers coverage? Most policyholders don’t
know that, in most jurisdictions, the law construes the insurance contract
most strictly against the insurance company who, after all, drafted the language,
and in favor of the policyholder. In reality,
what an insurance company tells a policyholder is also a contract whether it is
written in the contract or not. This also applies to the agent’s interpretation
of an insurance policy as it is orally expressed to the policyholder.
Punitive Damages
Punitive
damages may be involved in any lawsuit against an insurance company. For example,
one of our cases involved an insurance company that refused to pay for damaged
products for one of our clients following a major hurricane. The company couldn’t
replace the product quickly enough and lost business. The insurance company claimed
that the product was not covered, although it was implied. The insurance company
was found to be reckless and punitive damages assessed.
Laws Hold Insurance Companies Responsible
In
almost every state, insurance contracts, as well as most other contracts, include
an implied duty of good faith and fair dealing. This is often interpreted to mean
that the insurance company, when faced with an ambiguous choice between its own
interests and that of its policyholder, must favor the policyholder. Breach of
the duty of good faith can result in liability for not only the damages covered
under the policy, but for consequential damages - damages caused by the delay
in, or refusal of, payment, over and above those covered by the policy, and punitive
damages. In one recent case, an insurance company refused to pay for a client’s
damaged product. The company couldn’t afford to buy more product and lost
business. In cases like this involving reckless misconduct by an insurance company,
the insured may also be entitled to punitive damages. Partner
Ken Suggs has handled numerous insurance bad faith cases, and has lectured on
the topic in many legal education programs.
Law
Offices in: Maryland •
South Carolina • Washington, D.C. •
Pennsylvania • Georgia •
Minnesota
www.JanetJennerSuggs.com •
1-888-463-3529 | 
