Inherent in all insurance contracts is the covenant of good faith and fair dealing on the part of the insurer.
While Manhattan car accident lawyers recognize there are significant differences among jurisdiction in evaluating whether an insurer acted in bad faith, the covenant generally requires that an insurer not:
- Make unfair or unfounded refusals to pay policy claims.
- Cause an unreasonable delay in making a payment to the insured.
- Deceive the insured.
- Exercise an unfair advantage in order to pressure the insured into a potentially unfair settlement.
Unfortunately, insurance companies still engage in these practices, and they do so far more often than we’d like to think. They’ve simply gotten better about covering themselves legally.
In New York, it’s tougher than in other states to bring a tortious bad-faith insurance claim against a company. Insurer conduct is regulated under New York Insurance Law 2601, which deals with Unfair Claims Settlement Practices. Previous case law – in particular the 1995 case of New York Univ. v. Continental Ins. Co. indicates that breach of contract claims will ordinarily be limited to contract damages to write the private wrong. Punitive damages are less common.
This should not be construed, however, as meaning that injured parties should accept bad faith dealings on behalf of their insurer. Assume at the start that you may have issues in negotiating with your insurer, that these issues could lead to litigation and that you will need to have an experienced lawyer on your case upfront.
The recent case of Lockwood v. Geico General Insurance Company, reviewed by the Alaska Supreme Court, offers up one example of how insurance companies actively attempt to dodge the responsibility to pay.
Here, the victim was seriously injured in a crash caused by an uninsured drunk driver. She was rear-ended while she sat stopped at a traffic light. There was no question the other driver was 100 percent at-fault, that the other driver lacked coverage and that injured party had an insurance policy that provided uninsured motorist coverage of up to $50,000 per person.
The policy also included a maximum $10,000 per-accident medical bill coverage. Once the victim had maxed out that amount, she sought to collect on her uninsured motorist claim. Medical bills continued to pile up as she waited to settle with the insurer, and she was forced to take out a $5,000 loan so she could continue treatment.
The insurer offered her a total settlement of $750. She wisely declined this offer. The insurer countered by questioning the amount of her medical bills, and whether all of her treatments were necessary. However, the insurer never requested an independent medical exam to verify concerns about the veracity of her condition.
She later had to cease treatment because she could no longer afford to pay the bills.
Three years after the initial accident, shortly after the insured filed a bad faith insurance claim against the firm, the company agreed to settle her uninsured motorist coverage claim for $25,000. However, the settlement preserved her right to press forward on the bad faith claim.
Initially, the trial court granted summary judgment to the insurance company. However, the state supreme court reversed, finding there was a genuine issue of material fact as to whether the company had a reasonable basis on which to delay payment of the uninsured motorist claim.
Insurance companies have been known to rely on an assumption that you won’t fight back, that you’ll accept the first settlement offer they extend. An experienced lawyer will fight on your behalf to ensure you obtain the compensation you deserve.
The Law Offices of Nicholas Rose, PLLC offers free consultations. Call 1-877-313-7673.
Lockwood v. Geico General Insurance Company, May 2, 2014, Alaska Supreme Court
More Blog Entries:
Cohabitation and New York City Car Insurance: It’s Complicated, April 30, 2014, New York City Car Accident Lawyer Blog