Complex Insurance Coverage Litigation
Has your insurance carrier refused to tender underinsured benefits to you after you have been seriously injured in an accident and the tortfeasor had only the minimum limits? If so, you should be informed regarding your right to sue your own carrier for breach of your insurance contract, and in certain circumstances, for bad faith refusal to pay policy proceeds.
An insurance company must conduct an investigation before summarily denying your claim for payment of policy benefits under your UI/UIM Coverage provided for in your contract of insurance. Many times, this includes requesting that you undergo an independent medical exam and/or provide a tape-recorded statement about what happened.
If your carrier refuses to pay policy proceeds and/or refuses to pay a reasonable sum to you without first providing a legitimate rational basis for doing so based on the medical evidence and/or without first providing a written refusal referencing the exclusion relied upon, such actions may form the basis for a breach of contract action as well as a tort claim for bad faith.
What Is Considered An Unfair Practice By An Insurance Company?
Indiana Code § 27-4-1-4.5(6) provides that it is an unfair claims practice to not attempt in good faith to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear. The Indiana Supreme court has held that violations of the Unfair Claims Act can be evidence of bad faith. See Monroe Guaranty Insurance Company v. Magwerks Corp., 829 N.E.2d 968, 976 (Ind. 2005)(bad faith can be found where there is evidence of making an unfounded refusal to pay policy proceeds, causing an unfounded delay in payment, deceiving the insured; and, exercising an unfair advantage to pressure an insured into settlement of his claim).
The Indiana Code is based on the Model Act created by the National Association of Insurance Commissioners (NAIC) which drafted acts and regulations to regulate the conduct of insurance carriers in claims handling and related aspects of the insurance business. These acts and regulations became known as the Model Unfair Claims Practices Act (“the Model Act”), II National Association Insurance Commissioners, NAIC Model Insurance Laws, Regulations and Guidelines, 890-1 to 890-4, 900-1 to 900-10 (1977).
The Model Act identified various acts on the part of an insurer which constitute what is better known as “unfair claims practice.” The Act was promulgated in an effort to stop insurance carriers or deter them from disputing claims without justification and to penalize insurance carriers for forcing insureds to litigate in an effort to “wear them down” in an attempt to force an insured to accept a settlement that is less than the value of his or her claim. The majority of states have adopted the Model Act in some form, and Indiana is no exception. See the Indiana’s Unfair Claims Practices Act codified at IC § 27-4-1-4.5 et. seq.
Acts Which Are Prohibited Under Indiana Law
Indiana § 27-4-1-4.5(3) governs prohibited conduct with respect to required standards for claims adjustment and provides that all insurance companies shall adopt and implement standards for the prompt investigation and settlement of claims arising under its policies. The failure of an insurance company to adopt and implement those standards constitutes a prohibited practice.
The Model Act addresses prohibited conduct with respect to communications with an insured and lists 5 prohibited practices which often occur in personal injury actions:
- Failing in the case of claims denials or offers of compromise settlement to promptly provide a reasonable and accurate explanation of the basis for such action; see comparison, IC § 27-4-4.5(14).
- Not attempting in good faith to effectuate prompt, fair, and equitable settlement of claims submitted in which liability has become reasonably clear; See IC § 27-4-1-4.5(6)
- Compelling insureds or beneficiaries to institute suits to recover amounts due under its policies by offering substantially less than the amounts ultimately recovered in suits brought by them; See IC § 27-4-1-4.5(7); and,
- Refusing to pay claims without conducting a reasonable investigation. See IC § 27-4-1-4.5(4).
An insurance carrier’s violation of Indiana’s Act may subject it to penalties imposed by the Insurance Commissioner. While the Act itself does not specifically create a private cause of action, an insurance carrier’s committing a prohibited act as described in the Act often forms the evidence upon which a bad faith claim is based.
Do You Believe Your Insurance Company Has Acted In Bad Faith?
Indiana law as well as insurance industry standards and practice provide instruction as to when an insurance company has acted in bad faith. An insurance company does not stand in an arms-length transaction with its own insured. Rather, the carrier has a fiduciary duty to deal with its insured and his/her claim in good faith. Indiana courts have acknowledged that the obligation of good faith imposes that a carrier will not make an unfounded refusal to pay policy proceeds, cause an unfounded delay in making payments, deceive an insured, or exercise an unfair advantage to force their own an insured to litigate. An insured has the right to be informed of his or her rights or lack thereof. This extends to the negotiation process so that an insured can be placed on equal footing with the carrier when discussing settlement.
If you have attempted to negotiate the settlement of your personal injury claim on your own and are being stonewalled, call me today for a free consultation on why hiring an attorney to represent you is the best option.