Along with my colleague Patrick McGinnis, we are handling a number of hail claims across the country. As in the vast majority of claims that result in filing a lawsuit, we always seek to include causes of action for both breach of the insurance contract and failure to follow the duty of good faith and fair dealing in claims handling. The biggest challenge we face in maintaining the claim for breaching the duty of good faith and fair dealing remains the policyholders’ failure to timely respond to carrier requests for documents and/or examinations under oath.
After a claim is filed, the insurance company is certainly entitled to receive from a policyholder reasonable information that the insurance company requires to decide whether to accept or reject the claim. Unfortunately, as a way to delay the claim and discourage the policyholder, many insurance companies create daunting laundry lists of items from the policyholder they say they require before they can make a decision to accept or deny the claim.
Should any debtor hold on to money that is agreed owed? It seems like an absurd question, but in the insurance claims world, many insurance companies know that it is very profitable to "play the float." Even the most famous insurer admits that "playing the float" is very profitable, as I noted in Playing the Float and the Wisdom of Warren Buffett.
The title to this blog probably has many insurance claims managers saying under their breath, ‘No joke, Chip. Tell me something I was not taught on the first week of the job I have been doing for my adult life.’ But, what happens when things go wrong and those undisputed benefits do not get paid—can you get out of this mess without being held accountable? Sorta like being caught “red handed” and praying that nobody is going to call you for the foul. Here is the picture I think of when that happens:
In Texas, a statute may appear to read very specifically but courts can construe it very liberally. A liberal interpretation is the construction Judge Harmon of the Southern District assigned to Section 542 of the Texas Insurance Code. The court provided a certain degree of latitude when determining whether prompt means by a certain deadline or just a bit after the deadline has passed.
As promised in my post, Statute of Limitations in Colorado, this week I will discuss Colorado’s unreasonable delay statutes. In Colorado, insured’s have a cause of action they can utilize when pursuing a claim for benefits due after a loss pursuant to their policy of insurance. Colorado Revised Statute Section 10-3-1115(1)(a) states:
A person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.
“First-party claimant” is defined within this section in paragraph (b)(I) as an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. This statute further states in paragraph (b)(II)(B)(2) that for the purposes of an action brought pursuant to this section and section 10-3-1116, an insurer’s delay or denial was unreasonable if the insurer delayed or denied authorizing payment of a covered benefit without a reasonable basis for that action.
The Prompt Payment statutes, CRS §§ 10-3-1115 and 10-3-1116 (the “Statutes”), provide remedies to certain first-party insurance claimants, including recovery of two times the covered benefit, attorney fees, and court costs.
Commercial policyholders are increasingly having difficulty obtaining full and prompt payments. As a group, they are starting to stand up to the insurance industry’s failures to provide prompt payment and good faith claims treatment following losses.
Section 542.058 of the Texas Insurance Code states that “if an insurer, after receiving all items, statements, and forms reasonably requested and required … delays payment of the claim for a period exceeding the period specified by other applicable statutes or, if other statutes do not specify a period, for more than 60 days, the insurer shall pay damages and other items as provided by Section 542.060." This typically means that if an insurer – after the insured has submitted everything the insurer has reasonably requested – agrees to pay a claim and delays doing so, it could be subject to penalty interest and attorney’s fees. However, what happens when an insurer – after having received all reasonably requested information from the insured – initially denies a claim, but later realizes it was wrong and provides coverage? Does the Prompt Payment statute apply?