When policyholders are struggling to get their insurance carrier to honor its promises under a policy, the threat of litigation does not provide much of an incentive for the carrier to act fairly without the availability of extra-contractual damages. If the maximum recovery in a breach of contract claim against an insurance company is limited to the value of the claim and potentially an attorney fee award, insurers pursuing their own economic interest have a strong incentive to take their chances by denying the claim. If the insured gives up and abandons the claim, which often happens, the insurance company has increased its profits. Even if the claim becomes the subject of litigation, the insurer is not facing substantially more risk than the actual value of the claim under the policy.
The potential to pursue a claim for punitive damages and an attorney fee award provides the leverage policyholders need to keep insurance carriers honest when adjusting and paying claims. However, there are many issues and challenges that must be negotiated effectively by policyholders when pursuing a bad faith claim. The threat of punitive damages constitutes the most significant forms of financial motivation to insurance companies to avoid unreasonably delaying, denying, or low-balling a valid claim. This three-part blog provides answers to common questions about issues related to seeking punitive damages in Florida insurance bad faith lawsuits.
Does any denial of an insurance claim that is ultimately determined to be covered justify bad faith liability and punitive damages?
Bad faith practices require more than just a breach of contract by the insurance carrier. Arbitrary denials without adequate investigation or the intentional underpayment of a valid claim might constitute bad faith, for example. Florida law can make the process of seeking punitive damages complicated because policyholders must pursue relief under the Civil Remedy Statute, Section 624.155. While this statute expressly authorizes an insured’s right to pursue a legal claim based on bad faith conduct, the standard for obtaining punitive damages is more exacting for an insured under Florida law than in many other states.
This statute provides in pertinent part:
“No punitive damages shall be awarded under this section unless the acts giving rise to the violation occur with such frequency as to indicate a general business practice and these acts are:
(a) Willful, wanton, and malicious;
(b) In reckless disregard for the rights of an insured; or
(c) In reckless disregard for the rights of beneficiaries under a life insurance contract.” Florida Statutes Section 624.155(5).
The burden of proof for obtaining punitive damages also presents a challenge because the evidentiary standard is higher than the “preponderance of the evidence” standard for obtaining compensatory damages in civil lawsuits. The right to punitive damages must be established by “clear and convincing” evidence, which is a much more difficult burden of proof.
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].