Like many people, every month I write a check to an insurance company for a variety of policies, ranging from homeowners insurance to car insurance to health insurance, but rarely have a claim. If I do have a claim, I expect my insurance company to pay what is legally owed in a reasonably prompt fashion without a great deal of hassle and wrangling. In my view, this is what people have a right to expect in any business transaction.
Unfortunately, it is all too common for people to have an experience where their insurance company won’t return their phone calls and moves with the swiftness of a tree stump in processing their claim. Under Indiana law, such insurers may be guilty of the tort, or legal wrong, of bad faith.
In Indiana, an insurer owes their insured or policyholder a duty of good faith and fair dealing. This includes the concept of “equal consideration” where an insurer must give equal consideration to the interests of its policyholder as it gives to its own interests. The duty of good faith also includes refraining from making an unreasonable refusal to pay a claim, lying to its insured, or using an unfair advantage over an insured. Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind. 1993).
If an insurer has violated these principles, it had committed the tort or legal wrong of bad faith against its insured. If a jury finds that such a legal wrong has been committed, a policyholder is owed compensation for this wrong, in addition to whatever benefits are owed under the insurance policy.
As an example of a bad faith claim, in a case entitled Lumbermen’s Ins. Co. v. Combs, 873 N.E.2d 692 (Ind. Ct. App. 2007), a woman became disabled and made a claim for lost income under a disability policy that she had purchased that had a maximum benefit of $25,000. The insurance company refused to pay the claim, despite clear evidence that the woman was in fact physically disabled and unable to work.
Evidence was introduced at trial regarding the woman’s medical condition and the rather extreme financial hardship that she had suffered because of the denial of her claim. The jury also heard evidence that the insurance company rewarded its claims adjustors based upon how many disability claims they had denied, and that this insurer’s claims process was designed to favor a denial of a claim, regardless of its merit. In awarding damages, an Indianapolis jury awarded the woman policyholder $25,000 for the disability benefits that she was due under the policy, plus $1,500,000 in compensation for the bad faith conduct of this insurer.
If you’ve been treated unfairly by an insurance company, give me a call for a free consultation regarding your claim.