What is a Bad Faith Claim? Or, When Does an Insurance Claim Wrongfully Handled Become a Bad Faith Claim?
I was asked this question by a public insurance adjuster after a "top secret" settlement conference with a major insurer in Houston last night. It is an excellent question, and I will give some general guidance.
First, "bad faith" is a wrong term. Bad faith cases are truly a breach of the obligation of good faith. So, what is an insurer's obligation of good faith in a first party property insurance claim?
Most insurers would agree this describes their good faith obligations:
"Provide a sufficient number of properly trained and motivated adjusters with sufficient authority to promptly, honestly, and fully investigate facts at its own expense to find, and evaluate, all coverages, damages, and benefits of loss so that the amounts of all covered benefits are paid as soon as possible."
Don't hold your breath for this to happen in the field, but a number of claims managers agree. Why not--unless you are an insurer that wants to advertise that you consider profits a higher obligation than your legal duties to your customers?
I think this is enough to answer the question. What do you think?
With probably hundreds of carriers doing business in our state, we find only a few who as a matter of company policy actively resist legitimate claims filed by thier insureds
Your Coral Gables office has provided valuable assistance to the industry by filing CRN s of reported violations.
I anxiously await the opening of class action against the worst offenders and would happily volunteer to help organize that project in any way I can.
Thank you
Daniel- 561 929 8299
Theoretically, your response is fine. However, in reality you could be serving burgers and three days later be adjusting in Texas.
The only requirement for a license is attendance at a three day course designed to teach you the exam answers. Furthermore, few carriers give adjusters authority to settle, authority to recommend is what you get. The final decision is up to the carrier.
Until the system produces better educated claims personnel that carriers can rely on to make informed decisions, your hopes are really "pie in the sky". An educational system with a claims course at the college level would go a long way to resolving the dilemma, a graded licensing system wouldn't hurt either.
A broad and very optimistic definition that surely represents every policy holder's point of view.
Of course, there is also the obligation to comply with judicial and legislative good faith standards that attempt to define bad faith. I'm skeptical that most insurers would agree with the above definition because we certainly do not see it being regularly and consistently applied by claims departments.
A more realistic standard might be one which has been described (by the supreme court in my state - Washington) in Tank v. State Farm:
"An insurer must deal fairly with an insured, giving equal consideration in all matters to the insured's interests."
Of course, there are more than enough instances in which even the "equal consideration" standard is not met.
Bill and Veteran,
I wrote the part about claims managers agreeing because I have asked this question in depositions to some of the highest level of claims executives in the business. Most agree. A few modify what I have written.
Most claims managers in most insurance companies are very honorable people. They have a tough jog to do. Sometimes, what goes on in the field is not what management desires.
All groups have rogue instances of impermissible conduct. The issue is how the group then addresses that situation--especially if it is a claims department with legal obligations.
On the other hand, there are some claims managers that are simply instilling a bad culture and attitude about how claims are to be handled. Those organizations will eventually have problems which will be demonstrated in what Veteran is referring.
Bill,
An attorney at the Windstorm Network Board meeting today made a comment that the seminar on "properly handling an insurance claims file" needed an attorney to help teach the class. I responded, "What makes you think that an attorney knows how to handle a property insurance claim? They don't teach that in law school, and they don"t teach it in case law."
The point is that I teach policyholder attorneys to get the insurance company claims personnel to agree what the Rules are regarding what "good faith" adjustment means. Adjusters are taught what "good faith" claims handling means-although Veteran makes a point that they may not get taught this in Texas in a three day course.
I would suggest that you and all consumer minded attorneys read Rick Friedman's book, "The Rules of the Road" to see how adjusting rules are brought to light through the litigation process so that the nebulous insurance caselaw can be made much stronger for the policyholder in a bad faith case--which is really a lack of "good faith" case.
I appreciate your comment and thought. The Washington Fair Claims Act will change the insurance landscape regarding claims handling in your neck of the woods.
truth of the matter is that the industry is the locomotive long out of control and most circuit judges severely plagued and cramped by long foreclosure dockets a full two days per week have little or no time to allow the prudent and diligent Insured's counsel even the most basic few moments in time on a weekly motion calendar in order to make a point when it comes to the rather undesirable conduct and practises of probably most Insurers who would rather let a case go into the courts than deal fairly with and Insured, even when it comes down to perhaps a few thousand dollars to either resolve or toss the file into the quagmire of the courts; we can blog and blog and toss ideas til very blue in our collective faces----that gives us the glow and radiance of seeing our comments and our positions in print, but it has little or no effect on eradicating what is a major carrier-created epidemic in the courts of the country clogging the systems even more with files and claims and cases that should have, but were not, resolved. the idea of an class action brought about to halt stop and thwart the practises we so ably note and indict in our various comments is really what it is going to take to shine the needed national spotlight on what we are all talking about here----in essence, it's time for a 'balls up' nuts and bolts battle and the time will escape our grasp if not commenced very soon while all of this industry stuff still has even a small spot in the news headlines. take it to the bank---rarely have I been amiss on matters such as this one.
It's not just Texas - it doesn't take long to become an "Insurance Adjuster" in Florida either. According to www.Florida-adjuster-license.com, it says:
"....The 4 day Florida Certified Adjuster's course
(including examination) satisfies ALL Florida
Department of Financial Services requirements for
obtaining your Florida Insurance Adjuster's license.
Once completed, you will simply submit your application
to the State of Florida...you can expect to be a
licensed Florida Adjuster within weeks."
It takes longer waiting for the Mailman to deliver the "insurance license," (i.e.,..."within weeks") than it does to take the 3 day course and 1 day exam.
And it's cheap! I believe the quoted price was $538 (I know it was over $500, but less than $550). TALK ABOUT A BARGAIN!
I did note that Florida (finally) made it more difficult to become a "Public Adjuster." The same requirements mentioned above still must be met, but now, effective 1/1/09, a "new" FLORIDA PUBLIC ADJUSTER must serve a 1 year "apprenticeship" under another Florida Public Adjuster. "Serving an apprenticeship" is a fancy way of saying one has to "work" for another Public Adjuster. This would also most likely mean that the "new" P.A. would have to share his/her generated fees during this time frame; it's only fair that the "seasoned" P.A. be paid for his/her time I suppose. On its surface, this new requirement appears to be a positive one. At least the "new" Public Adjuster is being taught the "ropes" (hopefully the right way by a P.A. with scruples) and the public, in turn, stands a better chance of retaining a COMPETENT Public Adjuster.
Mr. Merlin, turning to your "description" of what an insurer's good faith obligations are, you covered some of them, but certainly not all of them (it would take more than 6 sentences to do that, as I know you are aware)!
Like Insurance Veteran said (and who can argue w/someone w/36 years plus in the industry?), "...few carriers give adjusters authority to settle, authority to recommend is what you get. The final decision is up to the carrier."
However, it would be a dream come true for ALL POLICYHOLDERS if their insurance company's PROPERLY TRAINED AND MOTIVATED Adjuster PROMPTLY visited the loss site (for example, a "total loss," residential house fire), conducted their investigation, evaluated and determined what coverages and benefits were available, ascertained and documented the loss amount and then whipped out a check book and paid the insured their policy limits for losing their home to a fire. We're assuming (under this scenario) that these activities are all occurring HONESTLY. If a policy limit check were tendered, then there would be no need for squabbling, but if it wasn't and the insured was not happy with the Adjuster's check amount (reflecting his/her HONEST Damage Estimate), then the Public Adjusters (and maybe later) the Attorneys would, unfortunately, have to enter the picture.
I say "unfortunately" because in an ideal situation w/a policy limit loss, the insured would be paid on the same day the Adjuster pulled into their driveway - and yes, that most definitely would qualify as GOOD FAITH conduct.
SHIRLEY HEFLIN
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