When Insurance Companies Act in Bad Faith, What are your options?

I'm going to explain when insurance companies act in bad faith when an insurance company issues an insurance policy to an individual or a company it's actually a contract a contract is a negotiated agreement between two parties it doesn't have to be reduced to writing but insurance policies are always.

Reduced to writing just because it's reduced to writing it doesn't mean it's restricted to the writings of that policy because the law infers in every contract that the parties to a contract will act in good faith when parties to a contract in the execution of that contract do not act in good faith they are acting.

In bad faith well when a party to a contract acts in bad faith they have liability for the consequences that flow from that bad faith activity and that holds true for insurance companies inferred in every insurance policy is that the insurance company will act in good faith well what does act in good faith mean from the insured's.

Perspective the person who's being protected by the insurance policy acting in good faith means that the insurance policy will not expose the individual or the company to personal liability over and above the insurance amount if they do if the insurance company exposes the insured to liability over and above the insurance amount when they did not have.

A good-faith basis to do so then they may be acting in bad faith so how does that happen if somebody and I'll give the a broad strokes hypothetical and then I'll tell you a real scenario but if for example an individual is driving down the road and hits a pedestrian who's in the crosswalk and the individual was.

Texting at the time and it's a hundred percent their fault and the individual who was in the crosswalk is catastrophic ly injured or even dies as a traumatic brain injury is loses a limb some very catastrophic injury and the individual in the car only has $100,000 of insurance if the lawyer for the catastrophic.

Injured person writes to the insurance company and says the damages the injuries that are caused far exceed the available insurance coverage but we are willing to accept the hundred thousand dollars in full satisfaction for any and all claims and not go against your insured personally if the insurance company doesn't immediately offer and.

Pay that hundred thousand dollars I'd ask why not very simply the insurance company is making a decision not in the best interest of their insured they are not acting in good faith but rather they're making a decision that puts their interest the insurance company's interest above their insurance interest.

Which is contrary to what the insurance policy requires and in turn acting in bad faith now if the insurance company offered 90 thousand out of the hundred thousand that is an act of acting in bad faith the lawyer for the injured person does not need to accept it and here I'll extend the hypothetical they don't.

Accept it they pursue a jury trial a jury Awards hypothetically a million dollars now the individual insured owes nine hundred thousand to the person they've catastrophic lis injured but they never would have owed that if the insurance company acted good faith so the insured the individual who paid the premiums to the insurance.

Pile to the insurance company and who caused the catastrophic injury now has their own claim against the insurance company saying you represented me in bad faith exposed me to $900,000 excess verdict and which you need to pay so what often happens is that insured is going to bring that lawsuit for the benefit of the injured person so what.

Can happen is that insurer the person who was once a defendant can assign their rights or their claim against their own insurance company to the injured persons lawyer to pursue that additional $900,000 for the benefit of the injured person that is the short version of what a bad faith claim is where the insurance company acts in bad.

Faith they put their interests ahead of their insureds now the scenario I just outlined for you related to liability insurance when the liability insurance company has an obligation to protect their own insured from a personal judgment now how about when an insurance company does that but against their own insured that they had under insurance.

Which I've outlined for you and if you're not clear on what under insurance I encourage you to search for the video blog that outlines under insurance it's very important information but if an insurance company doesn't pay the full amount of insurance that's owed their own insured then they have responsibility and liability for acting.

In bad faith because there's a presumption in the contract of insurance companies paying that which they're supposed to pay so there's one scenario I've handled multiple bad-faith cases but I'd like to share this one because it's it's little insightful as to how devious insurance companies often are and they need to be.

Watched every step of the way I represented an individual who was fortunate enough to have $300,000 of under insurance he was hit by an individual that only had $50,000 of insurance so we were able to collect the $50,000 of insurance and then seek the difference of what his injuries were from his own insurance company and the.

Process that we had to go through was an arbitration and an arbitrator awarded 250,000 dollars to my client so I wrote to the insurance company said the years the arbitrator's award you owe two hundred and fifty thousand dollars and they said no no you we get a credit for what you've already received the $50,000 well whether they get a credit or not is.

Fully defined by the insurance policy the contract of insurance that's between the individual and the insurance company there are some states that predefined that as a matter of law and there's a statute that says they either do get a credit or they don't get a credit and if there's no state law that defines whether they receive a cret the.

Insurance company receives a credit for what the injured person has already received then it's limited to what's contained in the contract and the state where I represented this individual was defined as to what's in the contract so I said to the insurance company there's no dispute that you owe your own insured my client two hundred thousand dollars.

And really all we're fighting over is whether or not you owe the other fifty thousand dollars that they've collected from the insured or do you get credit for it so why don't you pay the $200,000 now we'll submit it to a judge and the judge will tell us if you know the other 50,000 if the judge says you owe the 50,000 you pay it if the judge.

Says you don't owe the 50,000 well honor it they said no okay so the process that has we have to go through is we take the arbitrator's award and it's called convert it to a judgment so we took the arbitrator's award and we converted it to a judgment and we served the judgment on the insurance company the insurance company said we only pay you 200,000.

That then makes it ripe to go to a judge and we presented the judgment to a judge and said your honor we'd like you to acknowledge that it's two hundred and fifty thousand and they argued it was two hundred thousand the judge heard everything read the insurance policy and said two hundred and fifty thousand you get no credit so I wrote to the.

Insurance company and said pay the two hundred and fifty thousand dollars they said no we're appealing it we think the judge got it wrong so well pay the two hundred thousand you know you at least owe that no we're not paying anything okay they go to the appellate court this now takes another 18 months but once you went to a judgement you're entered and.

Entitled to interest in this particular state you're entitled to nine percent interest from the date of the judgement so now while they're not going to pay the 250 thousand I assured my client that's okay you're getting nine percent interest no matter how long this will take you're getting it on the 200 thousand.

And it should be the two hundred and fifty thousand so what does the insurance company do they now send in a check for two hundred and two hundred and fifty thousand dollars but what they I'm sorry for they send in a check for $200,000 and on the back of the check they write full and complete satisfaction for any and.

All claims now if you're not a lawyer you may not understand that if you actually sign that and deposit that deposit that check that's a contract and you are giving up your rights to pursue going forward so I took that check and sent it back to the insurance company said no no you owe two hundred and fifty thousand three months later they send.

Another check in for two hundred thousand says full and complete satisfaction and I'm sure that they were hoping that a support staff member in my firm maybe somebody in the accounting department would just take the check and deposit it without looking at it and of course we look at everything and they bring it to my attention and I send it.

Back this is all while the appeal is going on three months later they send another check two hundred thousand full and complete satisfaction we send it back but this time I got a little nastier I said no no don't ever send another check unless you're gonna send the 250 thousand with the interest that you owe the checks stopped coming the.

Appellate court agreed with the trial judge said they owe the full 250 thousand dollars okay now insurance company pay the 250 thousand dollars plus all the interest that you owe they said no we're not paying anything because we're going to appeal the appellate court because at the highest court there's a third layer of Appeal it.

Was insane to even think that that highest level of appellate court would take it because they only accept cases on appeal if there's a constitutional issue or there's a difference in the law in multiple jurisdictions within the state of which there was not I can't stop the insurance company from from dragging that out they have a right to.

Try to get to do that appeal but we knew they were gonna go nowhere so we're waiting and we're waiting and now a full another 15 months go by and I'm what I'm sharing with you I hate the date myself predates the internet it's when we used to get the actual law law a journal and read the newspaper and that the way you discovered whether or.

Not the highest court accepted the appeal you physically got the newspaper and you would read through the newspaper and you they didn't tell you when it was it was just in the newspaper so after 15 months not hearing a word all of a sudden we get in the mail a check for $200,000 and on the back it says full and complete satisfaction said these.

Bastards what are they doing and send it back and I get the newspaper sure enough the day before the appellate court ruled that they are not going to hear the appeal and they have nowhere else to go so they took one last shot to slip the check in so this is what I did once you have a judgment as an attorney I have the option to execute that.

Judgment what does that mean that means I can take that judgment that's signed by a judge they just sent me a check what is a check tell you tells you the bank where they bank and the bank account number I take the judgment and I serve the judgment on what is called an information subpoena on the bank and it freezes the bank account of the.

Insurance company the insurance company goes crazy I told my secretary the next day I said you're going to hear and get a lot of phone calls tomorrow here's the deal I'm not available I'm not coming in till noon because I knew once I froze that insurance company's bank account they can't do anything not one thing until I advise the bank that the.

Judgments been satisfied so I show up about noon I have maybe 50 messages from the defense lawyer who I've been doing this battle with throughout this whole process and who didn't have the courtesy of paying the $200,000 to my client and he gets me on the phone I call him at about noon and he says what'd you do that for so do what so.

What you freeze the insurance companies back account for and turns out I subsequently found out it wasn't just where they pay claims out of they also make payroll out of that and it happened to be payroll week and all the payroll checks bounced and he was angry with me what'd you do that for and he's yelling at me you shouldn't have done that you.

Know that they have the money to pay for it and I said very simply listen you did what you thought was in the best interest of your clients your insurance company and I did what I thought was in the best interest of my client either you pay the money or it's gonna continue to be frozen because well I don't think you should and I said I don't give a.

what you think you pay the money he says well how much well the two hundred and fifty thousand went up to about two hundred and ninety two thousand after you added the nine percent interest they said unless I have two hundred ninety two thousand dollars on my desk the next day it's gonna stay frozen first thing in the morning two hundred ninety two.

Thousand is on my desk I think we're done deposit it my clients happy as could be ten days later I got a phone call from my client what did you do what do you mean what did I do the insurance company just served a lawsuit against me which was sixteen paragraphs claiming that that he exploited the insurance company for too much insurance and then.

Within 15 minutes of hanging up the phone with my client they sued me as well so they sued my client and they sued me claiming there was too much insurance I'm sorry too much interest being charged well the reality is I told them two hundred ninety two thousand they really owed 293 290 mm probably four hundred but I always I always make.

Sure I added up a little bit less but the guy didn't do his math all he did was sue me and my client so rather than just call him up and say oh that's okay don't worry about it and and explain it to him i countersuit him i countersuit him i counter to the insurance company i told him it was malicious prosecution you're.

Acting in bad faith and we had now a whole new lawsuit well what happened was the lawyer for acted out of anger because I told him off on the phone and made him pay every penny that he owed my client he got so angry he acted emotionally and started a frivolous lawsuit well just because he started a frivolous lawsuit doesn't mean we have.

To accept the frivolity of that litigation and we counter sued him saying you commenced that frivolous lawsuit and acted in bad faith and several other claims suffice it to say his lawsuit was 16 paragraphs against us our counter suit was a hundred and twenty four paragraphs back at him well the insurance company is now on the hook.

And the insurance company takes that lawyer off of the case and moves it to another lawyer as soon as the new lawyer gets on the case it calls me first thing he says is look you know I'm really sorry this the did that math the wrong way and I'll tell you what if you withdraw your counter suit we'll stop our lawsuit we'll drop the.

Lawsuit that we brought against you you drop your counter suit so you can do whatever you want my case is going forward he said okay then we're not going to drop our lawsuit against you so the next step that happens is we after going through the processes of a lawsuit brought at what's called a motion to dismiss the case against us and when we.

Brought that motion to dismiss we said we want sanctions and costs sanctions are very rare for a judge to issue sanctions because really what it is it requires the lawyer to write a check out of their own pocket and they can't rely on the insurance company and we said we want sanctions for bringing a frivolous lawsuit that would that had no.

Merit whatsoever and dismissed the case so we went in front of this judge and it would the first thing that the insurance company did was they it's called change venue they moved the venue from where the case originally was to the hometown venue of the insurance company they thought we would be worried about that we go and to argue the case for the.

Motion to dismiss and our seeking of sanctions the judge the first thing the judge said to me was look in the 15 years or 18 years I've been on the bench I've never sanctioned a lawyer before ever so why don't we just try to work this out and I said judge you sit with robes on you have an obligation to hear the evidence and near the proof after.

You hear everything if you decide that this action and activity of this insurance company and this insurance company lawyer doesn't require a sanction and you hold them in contempt I will live by it but I'm not gonna drop it voluntarily until you hear everything at which time he conducted a full hearing I took the stand.

I explained the story I just shared with you and I could see the wheels turning in the judges head the next witness to testify was the lawyer who sued me and my client and remember this is the lawyer who was hired by the insurance company that my client paid premiums to that lawyer takes the stand and the judge immediately asks him these.

Questions can I ask you this before you started the lawsuit against mr. Finkelstein do you have other lawyers in your office yes I do did you get up out of your chair and go to the office next door and say can you check the math because I'm about to sue a colleague and a lawyer who's doing what he thinks is in the.

Best interest of his client can you check to see if they did the math right did you do that he said no I didn't do that I said okay but now let me ask you this after you brought the case to the other lawyer who did the math and determined that the math was done correctly in fact saved you 400 dollars.

Did you in fact stand call them and say we'll drop our lawsuit if you drop yours he said yes I do that's not how professionals act when you've done wrong you apologize and you'll make things right without conditions you do not have a quid pro quo asking to drop a meritorious case against you so that you can protect.

Yourself from a frivolous lawsuit that you brought I sanction you $10,000 at which time he had to pay me $10,000 but that's not the end of the story because then he called up and he said well I guess this is over I said no no that's not over we still have a claim for the frivolous lawsuit that you brought all that the judge did was sanction you for.

Doing the actions and activities that you did but my client suffered harm and I suffered arm you severed the relationship between myself and my client because my client couldn't understand I he did everything I recommended he dude do and you sued him there's damages related to that suffice it to say they paid another $30,000 on.

Top and then the whole thing went away so I tell you that story as a backdrop to insurance come they don't always act in the best interest of the people who are paying the premiums to them but at the end of the day if you hold tight and you hold strong don't make good

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