Why the Insurance Industry’s Efforts to Weaken Bad Faith Protection Should Matter to You

If you have insurance in any form, you may have filed a claim for damage to your home, business, vehicle or other form of loss or liability.  Whether your insurance company was cooperative or it made you walk the gauntlet to get your claim processed, many people throughout Florida struggle to get their insurance company to fulfill its obligations.  One of the most valuable weapons available to an insured when an insurance company refuses to act reasonably and fairly in handling a claim is an action for bad faith.  Predictably, the insurance industry regularly tries to eviscerate this remedy or eliminate it entirely.  Just last year, the insurance industry attempted to significantly limit bad faith claims in Florida.  While that effort ultimately failed, policyholders should understand the protection that bad faith insurance claims provide to policyholders who are victimized by their insurance company.

Florida Statute Section 624.155, for example, prohibits an insurer from “not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.” 

To understand the importance of this type of bad faith statute, we will examine its importance for a policyholder facing liability for a car accident.  The insured becomes distracted while approaching an intersection and blows through s stop sign. The insured T-bones another vehicle that had right of way.  The driver in the T-boned vehicle suffers significant injuries and sues the insured.  The injury victim suffers $120,000 in medical bills. 

The injury victim submits medical bills confirming the cost of care and demands that the insurance company pay the policy limit of $150,000 to cover medical bills, lost earnings, pain and suffering and other damages.  In this situation, the insured would have a compelling interest in seeing that the case gets settled for policy limits because a judgment could far exceed the policy limit given the extent of the medical bills.  Further, liability of the insured is fairly clear since the insured ran a stop sign, and the other driver had the right of way. 

The insurance carrier refuses the settlement, so the injury victim takes the case to trial.  The jury returns a verdict for $700,000.  Putting aside bad faith law, the insurance company is in no worse a situation than if it had accepted the settlement for policy limits.  However, the insured is now facing exposure to personal liability for the uninsured amount of the judgment (i.e. $550,000).  This amount of personal liability could financially ruin the insured, and it would have been avoided had the insurance company accepted the offer for policy limits.  Given the extent of the medical bills and fairly clear liability of the insured, the refusal to settle for policy limits constitutes bad faith.

Because the insurance company is not impacted by rolling the dice at trial in response to a settlement demand at policy limits, bad faith liability is the primary tool at the disposal of the insured to force his or her insurance company to act reasonably in settling the personal injury claim.  If the insured pursues a bad faith insurance claim, the insurance carrier might be required to pay the entire amount of the verdict.

Although the insurance industry frequently tries to water down bad faith insurance liability, this example demonstrates the importance of bad faith liability as a tool to reign in unreasonable practices by Florida insurance companies.  If your insurance company is treating you unfairly, unethically or illegally, my law firm helps policyholders who are struggling to get their insurance carrier to properly handle their claim.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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