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Insurance Bad Faith

Written by AMLO.

InsuranceFolderToday, insurance policies are a way of life.  We insure our cars, boats, homes, life, jobs, health, and personal assets.  It is not unusual for an individual to have ten separate insurance policies - some required by law.

In the early days, the insurance industry frequently engaged in abusive claims settlement practices.  Insurers routinely conditioned settlements on the insured's contribution of a substantial part of the settlement.  A large power and information imbalance existed between the policyholder and the insurance company.

Once a loss occurs, a claimant or policyholder may not obtain a new insurance policy to cover the loss if his existing policy does not pay.  There is no ability to obtain substitute performance.  This leaves the claimant with limited means of mitigating the damage, and in some cases, at the mercy of the claims adjuster.

The property and casualty insurance industry has admitted that it now spends of $1 billion a year litigating against its policyholders.

The Kentucky Supreme Court recognized the key role insurance plays in our society.  In Curry v. Fireman's Fund Insurance Co ., 784 S.W.2d 176(Ky. 1989), Justice Lambert, writing for the majority, stated:

"In this society, first party insurance coverage against a host of risks is recognized as essential.  From cradle to grave individuals willingly pay premiums to insurance companies to obtain financial protection against property and personal loss.  Without a reasonable means to assure prompt and bargained-for compensation when disaster strikes, the peace of mind bought and paid for is illusory."  Id. at 178.

The legislature also has recognized this need to balance the unequal bargaining position by enacting the Unfair Claims Settlement Practices Act (KRS 304.12-230) and a host of other statutes which give policyholders and claimants rights.

Mehr Fairbanks Trial Lawyers frequently sues insurance companies who refuse to pay for all types of insurance.  Bad faith in paying claims can happen after car wrecks.  It occurs when people buy credit life or disability insurance.  It can happen when health insurance will not pay for medical bills.  In all of these cases, the claimant or policyholder may sue for damages for their inconvenience, attorney's fees, interest and even punitive damages.