There are insurance bad faith tactics that can have far reaching consequences affecting parties beyond the policyholder.  When insurers put profits above the rights of policyholders and public safety, bad faith lawsuits can result in significant penalties depending on the facts, circumstances, and jurisdiction.  A Pennsylvania lawsuit that resulted in an $18 million bad faith verdict against Nationwide Mutual Insurance Company provides a telling example of the potential impact of unethical conduct by insurance companies on public safety.

The judge in the case issued a blistering condemnation of the insurer after ordering the insurance company to pay $18 million in punitive damages.  The verdict followed a lawsuit based on allegations that the insurance company had pushed a vehicle repair shop to perform inadequate repairs endangering both the insured and others who share the roadways.  At the time of the decision in June 2014, the verdict was reported to be the largest bad faith punitive damage award in the history of the state according to the Philadelphia Inquirer.

In reaching its verdict, the judge agreed with policyholders that the insurer had concealed evidence of substandard repairs performed on the insured’s vehicle following an accident.  According to the policyholders, the insurance company placed both the policyholders and members of the public at risk by permitting a vehicle that was not structurally sound to be operated on public roads.

When the vehicle was inspected by a repair shop, the insurance company was informed that the vehicle was totaled because the entire body of the vehicle was twisted.  Without disclosing this initial finding, the insurer insisted that a second appraisal of the damage be performed.  The manager of the repair shop directed that the vehicle be repaired at half of the $25,000 cost that would have been required to replace the vehicle after conducting the follow up appraisal.

The ruse pulled by the insurance company might have gone undetected but a former employee of the repair shop contacted the policyholders to warn them about the structural repair deficiencies.  After the policyholders contacted an insurance claims attorney, an inspection revealed that the crash-worthiness of the vehicle had been compromised. 

In characterizing the nature of the risk, the judge indicated “Fortunately, no one was killed or injured; but Nationwide knew there could be a subsequent accident when it permitted the vehicle to be returned with hidden structural repair failures.  This, by definition, is a reckless indifference to its insured.  Nationwide was willing to risk the [insureds’] lives to save itself money on a collision claim.”

While this conduct by the insurance company might seem egregious, the insurer engaged in other bad faith conduct that played a role in the large punitive damage award.  The insurer engaged in practices that were designed to delay a resolution of the case and artificially drive up the cost of the lawsuit.  Despite the fact that paying the full value of the property damage claim would have only amounted to $25,000, the insurance company invested over $3 million to defend against the lawsuit.  These litigation tactics included a multitude of unjustified obstacles that forced the policyholders to endure years of costly litigation.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by 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].

J.P. Gonzalez-Sirgo
J.P. Gonzalez-Sirgo, P.A.
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