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Breach of the
implied covenant
of good faith
and fair dealing
in an insurance
contract, or
"bad faith" in
the vernacular,
is a tricky
critter.
Ten years ago,
bad faith was a
staple for
consumer
lawyers; today,
some will tell
you it's a dying
area of the law.
Don’t believe
the doomsayers.
While there is
no question that
bad faith
litigation is
not a practice
area for the
faint of heart,
bad faith law
remains a
powerful tool to
obtain justice
for consumers.
With all that in
mind, this is
not an area for
the unprepared.
Here are five
fatal mistakes
you should take
care to avoid:
1. Not
looking for the
"mean" in your
case.
"The mark of a
good bad faith
case is
meanness," one
of my mentors
once told me. He
believed that
for a bad faith
case to fly,
there had to be
conduct beyond
something
irritating or
just maddening.
What you need to
look for is
conduct that is
mean,
insensitive or
unfeeling. If
you're just
uneasy or have
some vague
notion the world
should be
different, be
sympathetic, but
take a careful
look at the law
before diving
in.
2. Forgetting to
make sure
there's
coverage.
No policy, no
bad faith is the
simple rule.
Though there are
areas where the
simple rule
won’t apply,
that doesn’t
mean you
shouldn’t pay
coverage close
heed right from
the get go.
The lesson here
is, never take
coverage for
granted. Make
sure you
understand the
carrier's
reasoning for
doing what it
did in every
intimate detail.
Study the
correspondence,
collect the key
cases, gather
whatever
articles you can
find on point.
Also, bone up on
the genuine
dispute doctrine
whenever
coverage is in
dispute. See,
e.g., Chateau
Chamberay
Homeowners Ass’n
v. Associated
Intern. Ins. Co.
(2001) 90
Cal.App.4th 335.
3. Not
gathering all
the facts during
your
investigation.
There's a
temptation to
seize on one or
two key
documents or
bits of evidence
that seem to
show outrageous
conduct and try
to ride those
through to the
end, ignoring
everything else.
Resist that
temptation.
The insurance
regulations
require carriers
to keep records
on everything
material that
takes place
during a claim.
Get copies of
all that stuff
and make sure
the defense
brings the
originals to
deposition so
you can do your
own inspection.
If there’s an
underwriting
issue, get all
those files as
well.
Make sure your
client gives you
every scrap of
paper connected
with the claim,
whether they
think it is
relevant or not.
If the client is
a poor record
keeper, worry
about that. It
is amazing how a
small, stray
piece of
documentation
can rise up and
bite you in a
bad faith case.
A
little paranoia
is probably a
good thing here.
Remember, the
law right now is
probably as
favorable for
carriers as it's
been in several
generations.
Conduct yourself
accordingly.
4. Not preparing
for trial.
Don't work up
the case for
settlement or to
win on summary
judgment.
Prepare the
darned thing for
trial.
Anticipate the
worst and then
if something
better happens,
celebrate. Only,
do not ever
under-prepare a
bad faith case.
Remember what
insurance
companies do for
a living. They
sell promises on
paper, pay some
claims, deny the
rest and defend
their
decision-making
process to the
death. You may
have a great bad
faith case in
your file
cabinet, but if
you aren't
experienced in
the area,
beware, because
the folks
defending will
be.
So, put in the
time and gather
the knowledge.
Then put
everything
together as if
you will go to
trial.
5. Not facing
reality.
There's a
difference
between being a
believer and
being a fool.
Believers
understand their
cases, warts and
all, but know in
their hearts
they can steer
the client
through the
system and get
justice. Fools
don't understand
what they have
in their file
cabinet, but
bull ahead
anyway.
As you litigate,
make sure you
constantly
study, analyze
and evaluate.
Go get’em.
When you choose
to litigate
against a
carrier, go in
smart. Consult
an experienced
practitioner
where you have
questions.
Remember to
avoid the five
common mistakes
and, good
hunting!
LEARNING
CENTER
for more information:
Bill Daniels
regularly
publishes a
variety of articles and videos to
keep you abreast of legal developments and case law that
affect our society.
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