Presenting a live 90-minute webinar with interactive Q&A Pursuing Insurance Bad Faith Claims Over Personal Injury Claim Delays, Denials and Low Ball Offers Considerations and Best Practices for Proving Bad Faith and Maximizing Damages THURSDAY, OCTOBER 8, 2015 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Scott Glovsky, Founder, Law Offices of Scott Glovsky, Pasadena, Calif. Brian S. Kabateck, Founding and Managing Partner, Kabateck Brown Kellner, Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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Establishing and Arguing Bad Faith 6
IN 90 MINUTES SO BUCKLE UP! 7
WHY WE BUY INSURANCE Key to all damage arguments 8
BAD FAITH DAMAGES Why People Get Insurance An insured does not seek an insurance contract seeking profit, but instead seeks security and peace of mind through protection against calamity. Because security and peace of mind are the principal benefits for the insured, courts have imposed special obligations, consonant with the special purposes... (Love v. Fire Ins. Exch. (1990) 221 Cal.App.3d 1136, 1148.) 9
PIGS GET FAT HOGS GET SLAUGHTERED 10
IDENTIFYING TYPES OF INSURANCE First Party Coverage Involves an insured s claim against the insurer under coverage written for the insured s direct benefit Examples: Property Insurance UI/UIM Insurance Life, Health & Disability Third Party Coverage Provides coverage for liability of the insured to another Examples: General Liability Professional Liability D&O Liability 11
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3 PRIMARY AREAS OF DAMAGES Contract Damages Bad Faith aka Extra-Contractual Damages Punitive Damages 14
CONTROL CLIENT EXPECTATIONS 15
CONTRACT DAMAGES IN GENERAL A contract claim limits the insured to contract remedies only, i.e., unpaid policy benefits Threshold Questions: 1) Was there a breach? This is the gateway to bad faith and its damages 2) How was there a breach? i. Insurer denies that coverage is owed ii. Insurer pays only some of what is owed iii. Insurer pays but only after delay 16
ESTABLISHING BAD FAITH 17
WHAT IS BAD FAITH? Unreasonable vs. Negligence 18
RULES OF THE ROAD Insurance Special Relationship Business of insurance is highly specialized, with members particularly vulnerable and dependent on their insurer Must deal fairly and in good faith with its insureds - this is not an adversarial process. Must treat its insureds interests equal to its own interests Must make claims decisions without regard to profit. 19
BAD FAITH IN GENERAL For an award of bad faith damages, the insurer must have acted in bad faith, i.e., unreasonably or without proper cause The insurer is not a fiduciary but must give as much consideration to the welfare of its insured as it gives to its own interests 20
GENERAL BAD FAITH DAMAGES 1) Economic Harm All economic loss that the insured suffered as a result of the insurer s bad faith conduct 2) Attorneys Fees Attorneys fees incurred by an insured to compel payment of benefits due under an insurance policy Brandt v. Superior Court (1985) 37 Cal.3d 813 3) Emotional Distress Available in first party cases (insured must be a natural person), must demonstrate Articulable Harm : the story of what (bad things) happened to the client 21
ESTABLISHING BAD FAITH UNREASONABLE CONDUCT Admissible evidence to show an insurer acted unreasonably no single factor is conclusive but tends to establish unreasonable conduct: Failure to investigate claim thoroughly Failure to evaluate claim objectively Using improper standards to deny claim Unreasonable delay in payment of claim Dilatory claims handling Failure to attempt settlement Use of abusive tactics Violation of the Unfair Insurance Practices Act (Cal. Ins. Code 790.03) 22
INVESTIGATION Must fully, fairly and thoroughly investigate before a denial Fairly and objectively- must diligently look for evidence to support coverage Thoroughly - cannot deny based on insufficient information. 23
RULES FROM STATS/REGS Unfair Claims Settlement Practices (California Ins. C. 790.03(h)) Misrepresenting to claimants pertinent facts or insurance policy provisions Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims Failing to affirm or deny coverage of claims within a reasonable time 24
RULES FROM STATS/REGS Not attempting in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim 25
FAIR CLAIMS SETTLEMENT PRACTICES REGULATIONS (10 Cal. C. Regs. 2695.1-14) Insurers must disclose to their insureds or beneficiaries all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim Generally must accept or deny claims within 40 days after receipt, unless they advise the claimant in writing of the reasons for delay, and update the reasons every 30 days. Every insurer must conduct and diligently pursue a thorough, fair and objective investigation. No demands for immaterial information No unreasonably low settlement offers 26
WORKING UP THE CASE Detailed chronology Discovery focused on rules of the road Claim file and documents regarding claim Puzzle Attorney-client privilege Policies and procedures Training documents Colonial Life discovery Interview witnesses Research defendants Analyze case from perspective of defense counsel 27
DEPOSITIONS The decision-makers (adjusters) Who is this person? Background, training and experience Rules of the road Claims handling process Detail their investigation Did you investigate Why they decided to deny/delay the request What documents they read or relied upon before making the decision? Who did they talk to? How long did they spend on the request? How are they compensated? (bonuses, stock options) Punitive damage questions 28
Side note: Never set up insurance companies for bad faith. They are capable of it all on their own. 29
TRIAL STORY OF THE INSURER Trial Themes Promises and lies - trust and betrayal Policyholder bought peace of mind Insurance is a different type of business 30
1 ST PARTY COVERAGE PROPERTY INSURANCE Bad Faith Damages The insurer wrongfully denies a claim based on a policy exclusion or a non-covered peril The insured s policy covered water damage but not mold. The insurer s bad faith delay or denial of payment for water damage allowed mold to form. The insurer will be liable for the mold and other losses. 31
1 ST PARTY COVERAGE PROPERTY INSURANCE Bad Faith Damages The insurer becomes liable for pecuniary loss that arises from the delay or denial, even if the loss was not originally covered under the policy and whether it could have been anticipated or not Additional uncovered work to the home Living expenses Rent for temporary housing Mileage for increased traveled from temporary home to work Cost of fencing to secure damaged/destroyed house Cost of repairing/refurbishing personal items recovered Pet boarding cost and increased veterinary bill due to illness/injury resulting from the loss event 32
1 ST PARTY COVERAGE UM/UIM Facts An UM/UIM policyholder makes a claim for which liability of the underinsured motorist is clear and the damages are clearly in excess of the underinsured motorist s policy limits, and the insurer refuses to pay Facts to Consider Binding arbitration You will not exceed policy limits in UM/UIM The insurer can be liable for all articulable harm, attorneys fees, and cost of arbitration Damages insured sustained due to delayed payment 33
1 ST PARTY COVERAGE ARTICULABLE HARM STANDARD Use the Articulable Harm Standard How did the failure to pay UM/UIM benefits hurt the insured? 34
1 ST PARTY COVERAGE LIFE, HEALTH & DISABILITY Life Insurance Insurer contends that the medical condition was present at the time of application and not disclosed and then denies benefits of policy Bad Faith Damages Economic Harm Burial Expenses Foreclosure 35
1 ST PARTY COVERAGE LIFE, HEALTH & DISABILITY Health Insurance Failing to authorize necessary medical treatment entitled to, claiming that the treatment is not medically necessary when the insured s own treating doctors say it is The insurer may be liable for exacerbating insured s health for failure to provide policy benefits when due, or even death Bad Faith Damages Cost of health care not capitated rate Worsened condition/death What the family had to incur to pay medical expenses 36
1 ST PARTY COVERAGE LIFE, HEALTH & DISABILITY Disability Insurance Insurer contends that the insured s medical condition does not prevent him from performing his job Bad Faith Damages Economic Harm Loss of home, car, etc. Loans 37
1 ST PARTY COVERAGE LIFE, HEALTH & DISABILITY Beware of ERISA The Employee Retirement Income Security Act (ERISA) preempts many areas of state law regarding suits for employee benefit plans, including life, health, and disability insurance. Insured can only recover amount of benefits wrongfully denied, plus attorneys fees at the court s discretion. ERISA exemptions: government and public agency employees, church employees, employees whose employer only collects funds and does not endorse the program. 38
3 RD PARTY COVERAGE The Duty to Defend vs. The Duty to Indemnify The Duty to Defend is broader than the Duty to Indemnify 39
SCENARIOS & EXAMPLES 3 RD PARTY COVERAGE The Duty to Defend Wrongful failure to defend opens the insurance carrier to liability for the whole amount of the judgment, including any amount in excess of the policy limits The Duty to Indemnify The insurer is liable only for the damages that flow from the failure to indemnify The Duty to Settle Liability insurer has a duty to settle third party claims within policy limits when liability is reasonably clear 40
PUNITIVE DAMAGES 41
GOAL Malice Oppression Fraud 42
PUNITIVE DAMAGES IN GENERAL Requires a showing beyond unreasonable Show clear and convincing evidence of oppression, fraud, and/or malice Constitutional limits on punitive damages (State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 438) In California, multiplier by 3 4 is the limit, absent extraordinary circumstances (Century Sur. Co. v. Polisso (2006) 139 Cal.App.4th 922, 966.) It is an open question whether punitive damages have to bear a reasonably relationship to all compensatory damages or just tort damages. 43
BUILDING PUNITIVE DAMAGES Reprehensibility - most crucial factor in evaluating a punitive damages Factors whether the conduct involved repeated actions or was an isolated incident whether the harm was the result of intentional malice, trickery, or deceit or simply an accident 44 44
PUNITIVE DAMAGES Plaintiff has the obligation to prove the net worth of Defendant 45
PUNITIVE DAMAGES "In light of our holding that evidence of a defendant's financial condition is essential to support an award of punitive damages, Evidence Code 500 mandates that the plaintiff bear the burden of proof on the issue....these bedrock concerns policy and fairness support placing the burden on a plaintiff to prove a defendant's financial condition." Adams v. Murakami, 54 Cal. 3d 105, 119-20 (1991). 46
PUNITIVE DAMAGES Pull Annual/Quarterly Statements Online California Code of Regulation 2308.1 47
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