Frequently Asked Questions about Punitive Damages in Insurance Bad Faith Cases [Part 3]

This constitutes the final installment of our three-part blog post discussing the issue of punitive damages for acts of insurance bad faith.  (read Part 1, Part 2) While we have tried to address many common questions about this issue, we recognize that you might have specific questions about your situation.  We invite you to speak to J.P. Gonzalez-Sirgo at our Miami Insurance Bad Faith Law Firm.

Are there special evidentiary issues and challenges related to the claims file in Florida insurance bad faith lawsuits?

Insurance companies recognize that claims files typically contain the most devastating evidence of bad faith practices.  Carriers often fight tenaciously to avoid surrendering critical evidence of improper insurance adjustment practices.  Insurer objections to discovery requests regarding information in the claims file often involve assertions of privileges such as attorney-client privilege and work-product.

The claims file can establish the procedures and practices used by the insurer for conducting the claim investigation, negotiating settlements, and evaluating claims.  Examples of relevant documents include internal memoranda, activity logs, and correspondence.  If the file is devoid of  important information for assesing a claim, this might also support a claim of bad faith. 

The process of obtaining documents in the claims file involves experience with potentially complex discovery issues.  For example, many documents, such as a supervisor’s memorandum, might exist in multiple levels of the hierarchy of the company.  Failure to request relevant documents at all levels in the hierarchy of the insurance company can weaken a claim.  The indication of multiple recipients of a damaging document might provide evidence that the file at one level of the company has been purged if the document is missing from the file.

All underwriting files related to the claim should be sought in discovery.  Analyzing these documents can provide valuable information about the insured’s claim history.  The records might reveal that the risk under the policy was reinsured.  If this occurred, correspondence between the insurer and reinsurer often contain damaging admissions by the insurer.  Other documents that need to be investigated during discovery include but are not limited to the following: interoffice memorandum related to the types of coverage in the policy and the adjustment process, insurer claims manuals, and policy statements.  These materials might demonstrate a pattern of hostility toward legitimate claims.

How do insurers oppose discovery of the claims file in insurance bad faith lawsuits?

Insurance carriers recognize the critical role of the claims file in bad faith litigation.  Insurance companies aggressively oppose disclosure of their claims practices and files related to the claim at issue.  The claims file provides critical evidence regarding the facts surrounding the claim and the insurance carrier’s handling of the claim. 

Insurers employ multiple tactics to prevent disclosure of documents in the claims file that are relevant to the claim because of the potential value of this information.  The initial tactic used by insurers is a reliance on the bifurcation process imposed in first-party bad-faith insurance lawsuits in Florida by the Florida Supreme Court’s ruling in QBE Insurance Corp v. Chalfonte Condominium Apartment Assoc.  Pursuant to the state’s highest court’s decision, the issues of breach of contract and bad faith must be pursued separately.  Subsequent decisions have found that this does not necessitate a breach of contract settlement or judgment prior to filing a bad faith claim, but a determination of liability must occur, such as through an appraisal award, prior to initiation of a lawsuit. 

Insurance carriers often exploit this bifurcation process to exclude documents and information in the case file based on relevance.  The insurer often argues that documents about the mechanics of the claims process and specific claims procedures are not relevant at the breach of contract phase of an insured’s claim.  Because of the powerful nature of the evidence that often exists in the case file, policyholders benefit significantly from working with an experienced Florida insurance bad faith attorney.  When seeking punitive damages for bad faith, an attorney typically seeks discovery of other claims of a similar nature to demonstrate specific acts of bad faith constitute a “general business practice” for the insurer.  Insurance companies also frequently try to shield case file documents from discovery based on claims of attorney-client privilege, confidentiality (i.e. protection of “trade secrets”), and the work product rule.  

These are just some of the issues that insureds should be aware of when pursuing punitive damages for insurance bad faith practices.  As a Miami insurance bad faith lawyer, I invite you to contact us if you are having difficulties with your insurance company.  Miami bad faith insurance claims lawyer J.P. Gonzalez-Sirgo handles property damage claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.

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