When you are involved in a collision with a hit-and-run driver or an uninsured motorist, your uninsured motorist (UM) coverage provides a valuable source of compensation for lost wages and medical expenses after your initial $10,000 in personal injury protection (PIP) coverage has been exhausted.  Although policyholders pay an additional premium for their UM coverage, insurers often adopt an adversarial posture when their insured pursues a claim.  When an insured files a UM claim following a crash, the insurance carrier might engage in bad faith practices, such as failing to adequately investigate the claim or insisting on lowballing any payout.  A recent decision illustrates the challenges in pursuing a first-party bad faith claim against one’s own insurer.

In State Farm Mutual Automobile Insurance Company v. O’Hearn, decided by the 2nd District Court of Appeals of Florida, the insured submitted a claim for UM benefits after she was hit by a motorist who fled the scene of the accident.  The insurer sought review of the rulings by the trial court that granted discovery of the contents of the claim file and related documents, as well as abatement or dismissal of the insured’s action for bad faith.  The insurance company’s grounds for relief was that both discovery of the claims file and the bad faith action were premature.

The UM insurance carrier contended that the discovery request and insurance bad faith action should not have been allowed to move forward because the issues of liability and the value of the claim had not yet been resolved.  The insured countered that no issue of timeliness existed because the insurance carrier had determined the value of the claim was $5,000, which was offered as a settlement by the carrier.  However, the appellate court disagreed when considering the issue of whether liability and the amount of the claim had been resolved.  The insured contended that the amount of the compensable loss was far more significant than $5,000, so the court reasoned that this lingering dispute meant that the issues of liability under the policy and the value of the claim had not been fully resolved.  The court pointed out that prior decisions had specifically rejected the notion that partial agreement and settlement of the claim was sufficient to make the bad faith claim ripe for adjudication.

The court sided with State Farm in finding that long-standing authority in Florida held that a first-party bad faith action against an insurer could not move forward until the issues of liability and damages had been finally and fully resolved.  The rejected settlement of $5,000 made by the UM carrier could not constitute such a resolution of these issues because the policyholder was expressly arguing that the claim was worth substantially more than the $5,000 offer. 

With respect to discovery of the claim and underwriting files, the court again noted the well-established principle that this information generally was not discoverable until the dispute over liability and damages had been resolved.  The court rejected the notion that the insured’s election not to pursue a breach of contract lawsuit somehow made it unnecessary to settle the liability and damage issue prior to pursuing discovery of the claims file.  The appellate court ruled that broad discovery of the claims file and underwriting practices should not have been granted at this stage in the proceedings and that the bad faith action should have been dismissed or abated.

Insurance companies often fight to prevent juries from hearing damaging evidence about its claims handling practices because of the potential impact on an award.  However, sometimes evidence from the claims file and documents regarding underwriting practices can constitute both relevant and powerful evidence in the breach of contract action. 

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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