Bad Faith: When Insurance Companies Fail to Protect the Insured

Insurance companies have an obligation to protect the people they insure and consider their interests when handling claims. Far too often, insurance companies put their own interests ahead of those they insure, leaving their customers vulnerable to financial ruin through a judgment in excess of the insurance policy limits.

When an insurance company fails to protect the interests of its insured, tort victims making a claim against the insured may have the opportunity to recover in excess of the insurer’s policy limits. Langdon & Emison can help attorneys and client's navigate the complexities of insurance bad faith claims and can help maximize a client’s recovery.

Common Bad Faith Scenarios

Three common insurance bad faith situations arise when an insurance company: (1) denies a tort victim’s offer to settle within policy limits, which exposes the insured to an excess judgment; (2) denies coverage outright and refuses to defend the insured; or (3) chooses to defend under a reservation of rights wherein the insurer defends the insured but may later deny coverage. 

Bad faith claims can be complex and usually involve multiple steps. When representing the tort victim, it is good practice to make clear and specific demands within applicable policy limits and to leave the demand open for at least 30 days. If the insured/tortfeasor has personal counsel, it is helpful to keep the personal counsel informed of the claim and the insured/tortfeasor’s exposure to excess liability.

In the context of bad faith, some states allow the tortfeasor/insured to enter into an agreement with the tort victim to limits recovery to certain assets (e.g., §537.065, RSMo). Typically, the tort victim agrees not to pursue the insured/tortfeasor’s personal assets and to limit recovery to insurance proceeds and equitable garnishment claims against the insurance company after a judgment is entered.

These agreements can be very effective tools. If done correctly, facts and findings from an underlying judgment entered into pursuant to an agreement with the tortfeasor/insurer may be binding on the insurance company in a later action due to collateral estoppel.

Contact Langdon & Emison

Langdon & Emison is recognized as one of the nation’s top plantiff’s law firms, having taken on some of the world’s largest corporations in personal injury litigation from coast to coast. Our firm has more than 30 years of experience representing injured people and their families across an array of personal injury litigation, including but not limited to vehicle accidents, auto product defects, trucking and railroad accidents, and defective drugs and medical devices. Contact our firm for a free case evaluation at 800-397-4910 or click on the chat box to the right.

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