Idaho is a state with a diverse weather, and property owners have risks all year long. Adequate insurance coverage should be considered by all property owners. Some of the natural disaster risks in Idaho are wildfires, snowstorms, flooding, and earthquakes.
An insured may not be required to obtain fire or hazard insurance in an amount that exceeds the replacement value of the improvements.1 The Idaho Supreme Court has held that it will not be considered a breach of contract for an insurance company to choose between paying the insured the policy amount or defending an insured in a lawsuit involving title to the property. Neither will it create a liability for emotional distress.
The “Gem State” regulates insurance claims under the “Unfair Claim Settlement Practices”2 section of the Idaho Code. Like many other states, Idaho keeps track of practices in the business of insurance to avoid unfair methods or acts by insurance companies against insureds.
Idaho will consider as unfair practices those acts, omissions, or methods that consist of:
- Misrepresenting facts in insurance policy related to coverages.
- Failing to act reasonably and promptly upon communication with respect to insurance claims.
- Failing to conduct a reasonable investigation.
- Refusing to pay claims without reasonable investigation based upon all available information.
- Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.
- Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.
- Compelling insureds to recover less amounts than due under their coverage.
- Attempting to settle claims for less than a reasonable amount or on the basis of application altered without notice to, knowledge or consent of the insured.
- Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made.
- Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration.
- Delaying the investigation or payment of claims by requiring the insured duplicate information such as submitting a preliminary claim report and then a formal proof of loss.
- Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the policy coverage.
- Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
The Idaho Code also provides insureds a limited action to recover punitive damages. The insured must prove, by clear and convincing evidence, oppressive, fraudulent, malicious or outrageous conduct by the insurer.3 In all civil actions a claim for punitive damages shall be pursuant to a pretrial motion and after hearing before the court, amend the pleadings to include a prayer for relief seeking punitive damages. A court’s conclusion on the motion shall not be barred by lapse of time under any applicable limitation on the time in which an action may be brought or claim asserted, if the time prescribed or limited had not expired when the original pleading was filed.4 Judgments on punitive damages shall not exceed the greater of two hundred fifty thousand dollars ($250,000) or an amount which is three (3) times the compensatory damages contained in a judgment.5
The State of Idaho has a legitimate interest in preventing the mistreatment of its citizens by punishing insurance companies that exploit the vulnerability of their insureds.6 It is important for Idaho’s insureds to understand their policy coverage and how a claim should be adequately handled by its insurance company.
1 IDAPA Section 12.01.10.060.
2 ID ST Section 41-1329. Unfair Claim Settlement Practices.
3 I.C. Section 6-1604 (1). Limitation on Punitive Damages.
4 I.C. Section 6-1604 (2). Limitation on Punitive Damages.
5 I.C. Section 6-1604 (3). Limitation on Punitive Damages.
6 Hall v. Farmers Alliance Mut. Ins. Co., 2008, 179 P. 3d 276, 145 Idaho 313.