FAQs About About Bad Faith Insurance, Suing an Insurance Company, and Punitive Damages
BELOW ARE SHORT, SELECTED ANSWERS from our most frequently asked questions (FAQs) about insurance bad faith law and proper policyholder protocol.
You can find more FAQS and information about the policies of Shernoff Bidart Echeverria LLP (SBE) in our FAQs section.
This information is provided only as a cursory resource. It is not legal advice and in no way constitutes a lawyer–client relationship between the reader and SBE.
Information About Bad Faith Insurance and Tort Reform
Why is it called "bad faith" insurance law?
Thanks to senior partner William Shernoff’s precedent-setting case, Egan v. Mutual of Omaha (1979), insurance companies are legally bound by a "covenant of good faith and fair dealing" in treating their policyholders. When an insurer breaches this covenant, by unreasonably delaying or denying payments, for example, it is acting in bad faith and can be sued for actual and consequential damages as well as punitive damages. Hence, although the term sounds negative, it is a huge plus for policyholders, as it provides substantial recourse against insurance companies that mistreat the people they serve.
What is tort reform, which many politicians seem to be talking about? Is it good for the consumer?
Shernoff Bidart Echeverria LLP believes that tort reform is aimed at protecting corporate profits and making it much harder for the common citizen to confront a mighty corporation on equal footing. The so-called reform refers to limiting the legal remedies available to consumers when they are defrauded or otherwise taken advantage of. For example, tort reform would put a cap on punitive damages and damages for emotional distress and reduce statutes of limitations.
Information About Punitive Damages in Lawsuits
What are punitive damages? How does one collect them?
In addition to awarding a plaintiff actual damages and damages for emotional distress and/or physical injury, the court may assess punitive damages against an insurance company to serve as a punishment and deter the company from acting in bad faith again. For this to occur, it must be proven that the insurer acted with malice, fraud or oppression.
Can I sue my insurer for emotional distress resulting from the bad faith handling of my claim?
In general, yes. In many instances, an insurance companys unreasonable denial or delay of a valid claim can result in life-altering misfortunes, such as repossession of property, refusal of needed medical care, foreclosure of a business, etc. These events naturally can have substantial emotional and/or physical repercussions, and those who suffer them are often compensated when bad faith is substantiated.
What is the philosophy behind punitive damages awards?
If a policyholder commits insurance fraud, he or she may go to jail. Because insurance companies don't go to jail when they commit fraud, they must be punished monetarily. The only way to monetarily punish a company that makes millions or billions of dollars in annual revenue is to take enough of its profit to make the punishment felt. Yet amazingly, most punitive damage awards represent only a tiny fraction of a company's surplus.
Information About Filing a Lawsuit Against Insurance Companies
Are there deadlines that can affect my taking legal action against my insurance company?
There is something called a statute of limitations, which is the period of time in which it is permissible to file a law suit. This can be a tricky area of the law, though, so a bad faith attorney should be consulted to determine the statute of limitations applicable to your matter.
If I pursue my claim in court, will I be punished with a higher premium?
Your pursuing a legitimate claim, even in court, does not automatically give the insurance company the right to punish you with higher premiums. After all, what is the point of paying for insurance if you are afraid of filing a valid claim or protesting the unfair handling of a claim? Additionally, there are a number of restrictions that can apply to raising premiums. For example, if you are a member of a group policy, the whole group premium must be raised - not just yours. In other cases, the insurance company may have to receive approval from the Department of Insurance to raise rates.
Do any insurance companies have particularly bad or good track records in handling policyholder claims?
It is impossible - and unfair - to generalize. Personnel and management changes in insurance companies occur frequently and can result in an increase - or a decrease - in unfair claims handling practices. No one carrier can be labeled the most notorious; likewise, probably no major insurance company has been immune from legitimate bad faith litigation.
Information About Suing an HMO
Is it as easy to sue an HMO as it is sue a regular insurance company?
Not in most cases. By and large, it is tougher to pursue a court case against an HMO because of the greater number of legal restrictions that apply. In the event of a valid dispute with an HMO, a policyholder should consult with a qualified lawyer to ascertain if these restrictions apply.
Our Southern California Law Firm Can Help
Insurance Bad Faith Claims – Personal Injury
Perhaps your insurance company delayed or denied payment of a legitimate claim. Maybe they changed the terms of your policy without giving you proper notice. It may be that your health insurance company retroactively cancelled your coverage after you made a claim. These are only some of the ways insurance companies take advantage of their policyholders.
At Shernoff Bidart Echeverria LLP, we have more than 35 years of experience representing policyholders who have been mistreated and abused by their insurance companies. We also represent victims of catastrophic personal injuries.
If you believe you have been a victim of insurance bad faith please contact our Southern California law firm today for a free consultation and case evaluation.
