When it comes to auto accidents, insurance companies are notorious for being difficult. We work aggressively on behalf of our clients to negotiate reasonable settlement agreements with insurance companies attempting at every turn to mitigate their own liability.

adriverOften this is effective. Other times, cases have to be taken to trial.

And when it comes to trial, an injured victim who can show the insurer acted in bad faith can secure treble damages. That means they may receive triple what they would have otherwise received. The ultimate goal is to protect consumers from unfair practices by insurance companies.

Usually, proving bad faith means the insurer failed to issue or accept a reasonable settlement offer where liability was clear. These cases are mostly third-party claims. That is, in car accidents, it’s the injured person filing a claim against the insurance company that issued coverage to the at-fault driver.

However, there are some cases in which the insured may have a claim of bad faith against the insurer for failing to properly indemnify or inform or otherwise fail to meet obligations due under the terms of the policy. Where a defendant has been found personally liable as a result of bad faith, he or she may confer the right of that bad faith action to the injured party, in exchange for a release of personal liability.

This was exactly what happened in the recent case of Kelly v. State Farm Fire & Casualty Co., before the Louisiana Supreme Court. The case stemmed from a car accident in which insured was making a left turn into the path of plaintiff’s vehicle, causing a collision. Defendant disputed plaintiff’s version of events (which was backed by another witness) and insisted he had the right-of-way.

In either case, plaintiff was injured and spent several days in a local hospital suffering from, among other injuries, a broken femur.

Plaintiff secured immediate legal representation, and attorney sent a letter to insurer requesting the full policy amount. There was some confusion, however, because attorney believed the policy limit was $50,000, when in fact it was $25,000. Plaintiff’s medical bills were about $26,000.

Insurer didn’t respond to this request, but in subsequent discussions with plaintiff attorney, agents agreed to tender the full $25,000. Plaintiff rejected this offer.

Insurer then notified its insured he may want to secure personal legal representation because he could be found personally liable for plaintiff’s injuries. However, insured was never told of the previous exchanges or how much plaintiff’s medical bills were – only $1,000 in excess of the policy limit.

The case went to trial, and defendant was ordered to pay $176,000 in damages. The insurance company tendered $25,000  – the policy limit. Defendant then struck a deal with plaintiff that would release him from liability if he would assign his rights to a bad faith claim against the insurer to the plaintiff. Defendant agreed, and plaintiff filed the bad faith lawsuit.

Insurer sought to have the case dismissed, arguing it couldn’t have acted in bad faith because it never received a formal settlement offer from plaintiff and it wasn’t required to inform its own insured of talks that took place prior to the filing of the lawsuit.

A trial court sided with defense and granted summary judgment. Plaintiff appealed, and appellate court certified two questions to the state supreme court:

  • Could an insurer be held liable for bad faith despite never receiving a formal settlement offer?
  • Could an insurer be liable for misrepresenting or failing to disclose facts not related to the policy’s coverage?

The court answered affirmative on both points, meaning plaintiff is now free to continue pursuit of her bad faith insurance claim.

If you have been a victim of a traffic accident, call Chalik & Chalik at (954) 476-1000 or 1 (800) 873-9040.

Additional Resources:

Kelly v. State Farm Fire & Casualty Co., May 5, 2015, Louisiana Supreme Court

More Blog Entries:

Hurtado v. Desouza – $1 Million Florida Injury Verdict Reversed, April 29, 2015, Cape Coral Traffic Accident Lawyer Blog