INSURER BAD FAITH & ITS DUTY TO INVESTIGATE CLAIMS

REALLY UNREASONABLE CLAIMS INVESTIGATIONS =

INSURER BAD FAITH

The Law Firm of Michael Sean Quinn*
*Author          
2630 Exposition Blvd., Suite 115          
Austin, Texas 78703 
          (512) 656-0503              
             
 E-mail:  mquinn@msquinnlaw.com            

          Insurance claims cannot be validly denied unless the denial is based upon a reasonable investigation. To do that is at least a paradigm of insurer error, and if the mistake is bad enough it will constitute insurer bad faith.  These kinds of errors can lead to winnable lawsuits based upon the common law or upon a variety of statutes in every state. There can be not only actual damages but also punitive, or, exemplary, damages.  Many are the reported cases from courts discussing these matter—“legion” is an exaggeration.

            So, how many ways can an investigation by an insurer, or by someone the insurer has hired, be unreasonable? Let me count the ways.

(1) Not done at all.

(2) Started late.

(3) Too long.

(4) Poor adjuster.

(5) Right questions not asked.

(6) Insufficient data collected

(7) Important data not studied appropriately.

(8) Demanding an insured to provide the same information several times.

(9) Demanding an insured provide data when the insurer knows the insured cannot do it.

(1) Demanding an insured provide data when the insurer knows that the insured is unlikely to be able to do it.

(11)  Demanding an insured provide data when the insurer does not really need it.

(12)   Demanding an insured provide unnecessary data.

(13)   Demanding data from the insured when the insured could collect that data much more easily than the insured can.

(14) Demanding that the insured engage in the burdensome collection of data, where a smaller amount or group or assortment would be sufficient.

(15) Threatening the insured with a claim denial, whether explicitly or impliedly, in connection with unnecessary work.

6) And on, and on, and on again. 

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     Notice that there are a whole variety of ways that an investigation can be unreasonable: None enough of this or too much of that.  Interestingly, an investigation can be defective for several opposite reasons all at once.  Suppose a claim had two independent aspects. An insurer could not do enough on one, A, but the right amount on another, B.  Or, a right about on A but too much on B. Starts late on A, but on time with B, but it’s A-lateness temporally retards the whole show. And so on.

            Does this sound like it involves a lot of balancing? Well, it does.  But balancing can require exactitude, or at least precision, under many circumstances. It must be remembered that built into all of this is the following proposition:

Except where there is a preconceived and intentional screw-job imposed on the insured, insurer negligence is a necessary condition for bad faith but not sufficient. And it must be kept in mind that the word “negligence” does not mean a separate cause of action in tort.

The word “negligence” means careless, sloppy, stumbling around, forgetful, and/or inattentive.  It is important to remember that all these can occur at once, or only a few of them together.  It must also be remembered that some instances of negligence can amount to a breach of contract.