Many policyholders accept lowball settlements or denials from their insurer because the prospect of litigation against an insurance carrier with virtually unlimited financial resources can be a daunting prospect. Fortunately, bad faith liability can balance the scales of justice to some degree by raising the spectre of a damage award that significantly exceeds the cost associated with paying the full value of the claim. To that end, the threat of bad faith liability can be a valuable tool.
A recent $2 million verdict in an insurance bad faith claim involving an insurer that delayed settlement of a claim for years demonstrates that policyholders can and do prevail against large insurance companies. The trial court award, which was upheld on appeal, included both a “lost profits” component and punitive damages in the amount of $1.5 million.
The landowners in the case of Davis v. Fidelity National Title Insurance had their construction project delayed by almost five years because the insurer failed to resolve an underlying property dispute. The policyholders purchased 15 acres of land in 2004. In 2007, a property owner in the area claimed that he owned 1.86 of the parcel to which the policyholders claimed title. The policyholders filed an insurance claim later in 2007 with their title insurance company. The insurer conceded that an issue with title of the disputed portion of the property existed in 2009. Nonetheless, the insurer denied a demand to settle the dispute for $40,000 in 2010. The matter was ultimately settled in 2012 for $50,000.
The policyholders were awarded $393,000 in compensatory damages and more than $1.5 million in punitive damages based on the position that the insurer acted in bad faith. The damages included an estimated $272,000 in lost profits based on the calculations presented by a real estate appraiser. The insurance company claimed that the prospective lost profits were “futuristic” and hypothetical because they were based on the inability to start a construction project that included building a housing development.
However, the appellate court observed that the trial judge rejected the insurer’s position because the evidence established that the policyholders had sufficiently initiated the project. The trial judge cited the hiring of engineers, purchasing plans and conducting of surveys. Further, the judge also found that the real estate appraiser’s methodology for calculating lost profits was adequate.
While the insurer claimed there was no connection between its handling of the claim and the alleged lost profits, the trial judge also rejected this contention. The judge pointed out that it was beyond dispute that the housing development could not be commenced until the property dispute was resolved. This delayed the project five years seriously damaging the ability of the property owners to proceed with the project.
The insurer also claimed the punitive damage award was excessive. However, the court observed that punitive damages can be awarded for “reprehensible” conduct. While the insurance company did not intentionally harm its policyholders, the court observed that the insurer demonstrated a “reckless indifference” to the rights of the policyholders. The five year delay occurred in the context of repeated disregard of the warnings of the insurer’s counsel and requests by the insured.
If your insurance company is acting in bad faith in processing your insurance claim, an experienced insurance claims attorney can help you counter such denials.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgoby dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].
