Auto insurance companies are required by law to willingly pay legitimate claims both properly and promptly. This is called acting in “good faith.”
When an insurance company fails to pay legitimate claims, issues low-ball settlement offers or significantly delays a payment or creates unnecessary hurdles for insureds, this is called acting in “bad faith.”
The penalties for bad faith actions by insurance companies are stiff, and can result in treble damages owed to plaintiff. Unfortunately, even this is sometimes not enough to make insurers fall in line. In these instances, those covered by the policy (including victims of a car accident) may file a bad faith lawsuit.
This was what occurred in target=”_blank”>21st Century Ins. v. Super. Ct., a case before the California Court of Appeal, Fourth Appellate District, Division Two.
According to court records, the lawsuit stems from a serious auto accident that critically injured a passenger. That passenger later died.
The driver of that vehicle, a teenager, was operating a vehicle that was owned by his grandfather and insured by a policy secured by his sister. That policy was for $100,000 in liability coverage, and specifically named the teen driver as a driver on the policy. That policy was issued by the defendant in this action.
Before the injured passenger’s death, he and his mother filed a lawsuit for compensation for his injuries (and later, the claim was amended to reflect his wrongful death).
The defendant insurance company offered to settle the claim for the policy limits of $100,000.
However, decedent’s mother, acting as the plaintiff in this action, also believed the teen driver was covered under two additional policies held by the teen’s aunt and grandmother, with whom he lived. Each of those policies – also issued by this same defendant insurer – allowed for an additional $25,000 in coverage.
With this information, plaintiff offered to settle the claim for $150,000. The defendant insurer would later claim it never received that offer from plaintiff’s counsel. The court would note there was ample evidence to the contrary. The deadline for acceptance of that offer passed.
In recognizing the seriousness of its position, the insurance company – after the deadline – agreed to settle the claim for $150,000. Plaintiff chose not to accept this offer, and later extended a compromise of $4.1 million – $3 million for decedent and $1.1 million for his mother.
Before that offer expired, defendant insurer sent the teen a notice warning him that it would not agree to be bound if he accepted that offer. Nonetheless, plaintiff agreed to that offer.
The insurer paid the plaintiff $150,000 plus interest, and the teen then assigned whatever right he had to a bad faith action over to plaintiffs in this case. In exchange, plaintiff agreed not to pursue him for the excess damages of the agreement.
Plaintiff then filed a bad faith action against the insurance company. The lower court refused defendant insurance company’s motion for summary judgment. However, the appeals court reversed.
The court noted that even though the insurer had agreed to pay the additional $50,000 on the other two policies, that does not mean it had conceded liability on the two policies. Further, because the action was settled rather than litigated, the full scope of damages was not established.
Contact the Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.
21st Century Ins. v. Super. Ct., Sept. 10, 2015, California Court of Appeal, Fourth Appellate District, Division Two
More Blog Entries:
Frazier v. Drake – Sudden Emergency and Unavoidable Accident, Sept. 12, 2015, Winston-Salem Car Accident Attorney Blog