A recent Georgia case1 is an example of a loss that should never have been made into a “bad faith” lawsuit. The policyholder only received an additional $3,512.10 in damages over what the insurance company paid before the lawsuit was filed. In yesterday’s post, Good Faith (WKA Bad Faith) Lawsuits Do Not Always Result in a Policyholder Trial Victory, I noted a number of factors that tend to indicate a good claim practice lawsuit. I also stated:
I also look for big differences between the amount offered versus the amount recovered by the policyholder. For instance, if the insurance company is largely correct and just missed the evaluation, the case is very different from one where the insurance company missed the ball, and there needs to be a good faith explanation.
Georgia is a “reasonable basis” state. In the recent case, the policyholder admitted that the insurance company had a “reasonable basis” not to pay additional amounts:
Passmore does not dispute that Travelers had reasonable grounds to contest her claim when material questions existed about whether the amount it paid for roof repairs was adequate and whether other repairs identified in Atwater’s proposal were covered under the policy.
No wonder the policyholder lost.
Not every disagreement with an insurance company is one where there is a lack of good faith. A prompt, honest, thorough, and well-reasoned refusal to pay based upon all available information, and not a decision tarnished with bias or by outcome-oriented claims goals, cannot be said to be one lacking “good faith.” A policyholder may be frustrated or angered by the decision, but that is not the test for whether those making the decision on behalf of the insurer lacked good faith in doing so.
From a claims management perspective, what is good faith claims handling?
To provide a sufficient number of properly trained and motivated claims adjusters with sufficient resources and authority to promptly and fully investigate coverage and evaluate damage so that the policyholder promptly receives all benefits contemplated under the insurance product.2
For those insurers with this type of good faith culture—cheers! For others, there is always time to change the road you are on.
Thought For The Day
Goodness is the only investment that never fails.
—Henry David Thoreau
1 Passmore v. Travelers Cas. & Surety Co., no. 21-12423 (11th Cir. Jan. 27, 2022).
2 (Chip Merlin. What Is Good Faith Insurance Claims Handling? Property Insurance Coverage Law. Feb. 3, 2022. (Available at https://www.propertyinsurancecoveragelaw.com/2009/02/articles/hurricane-ike/what-is-good-faith-insurance-claims-handling/)