Common Insurance Claims-Related Questions [Part II]

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

This is Part II of our two-installment blog post answering common questions about insurance claims bad faith.  Click here to read Part I.

Can you recover damages for emotional distress if your insurer uses bad faith tactics when handling your claim?

Many bad faith denials of coverage have a monumental impact on people’s lives.  When a claim is denied, an insured might suffer the following types of devastating consequences:

  • Death of a loved one because of the bad faith denial of a health insurance claim for cancer treatment
  • The specter of bankruptcy because an auto accident insurer refuses a settlement offer for policy limits
  • Loss of a business because a carrier fails to pay for the increased cost of rebuilding related to changes in building code standards

The loss of a home, family member, or business can have a significant physical and emotional impact.  Policyholders who suffer emotional distress might be able to obtain a monetary recovery for this form of harm especially when the emotional harm has physical consequences.

Will you need to deal with a trial if you retain a lawyer to pursue a lawsuit for breach of contract or bad faith?

The vast amount of cases settle short of trial.  There are many forms of alternate dispute resolution that can be effective in settling insurance disputes, such as appraisal, mediation, or informal negotiations.  Our law firm approaches insurance claims disputes with a commitment to engaging in the necessary investigation and legal research to craft a strong litigation strategy.  While most cases will settle without a trial, we operate on the theory that the best negotiated insurance claims are the product of persuasive legal positions that might merit a substantial judgment at trial.

What makes a bad faith insurance claim potentially more lucrative than a claim based on breach of contract?

Every insurance policy is essentially a contract between the insurance carrier and the policyholder in which the insurer promises to indemnify the insured against certain financial risks in consideration for premium payments.  When an insurer breaches its promises contained in the policy, the insured can obtain contract damages.  However, punitive damages generally are not an element of the recoverable damages for a breach of contract.  Typically, punitive damages are awarded in a lawsuit involving a “tort” claim, such as bad faith conduct by an insurance company. 

In broad terms, contract damages are intended to place the aggrieved party in the position he or she would have been in had the other party fully performed under the contract.  Punitive damages serve a completely different purpose, so they are calculated based on other grounds.  The function of punitive damages is to discourage particularly egregious conduct and deter such conduct in the future.  The calculation of punitive damages involves ensuring the award is sufficient to serve the function of this type of award.  When the defendant is an insurance company that makes millions of dollars in annual revenue, the award will not discourage future misconduct or provide an effective monetary “punishment” unless the award is substantial enough to make the loss of profits felt by the carrier.  This means that a punitive damage award frequently dwarfs all other forms of compensation potentially available to a policyholder whose claim is unreasonably denied, delayed, or underpaid. 

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].

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