For Bad Faith Insurance Clinic (00555225)

FRIEDEMANN GOLDBERG LLP THE BASICS OF INSURANCE BAD FAITH JANUARY 23, 2018 Presenters: John Friedemann Eric Ratinoff FRIEDEMANN GOLDBERG LLP Friedemann Goldberg LLP was founded in 1999 by a group of attorneys who sought to combine the high- quality legal services of a larger firm with the attention to detail and responsiveness of a smaller firm. In the years since, we have become one of the premier law firms in the North Bay. The firm’s objective is to assist clients in the resolution of legal issues by delivering the quality professional service Practice Areas expected from large law firms, but with greater efficiency and responsiveness. Banking Law As a boutique firm comprised of experienced and creative Bankruptcy & Creditors’ attorneys, we are able to handle complex matters with Rights flexibility and speed. Business Law We maintain close affiliations with lawyers throughout California, as well as the country and the world, assuring Cannabis Law the ability to deliver the finest legal services to our clients Electronic Discovery with great flexibility. Insurance Law Friedemann Goldberg is recognized nationally as a top- tier law firm and our attorneys are rated at the highest Intellectual Property level of excellence by their peers; signifying their high Litigation ethical standards, knowledge, capabilities, judgment, communication ability and experience. Real Property Law With offices in Santa Rosa, nSa Francisco and Sacramento, Sports & Entertainment we are conveniently located to formulate creative solutions to meet our clients’ needs and serve our clients Tax Law with the very highest caliber legal resources. Trusts & Estates SAN FRANCISCO 415.362.6598 Santa Rosa, CA 95403 601 Montgomery St., Suite 888 SANTA ROSA 707.543.4900 San Francisco, CA 94111 420 Aviation Blvd., Suite 201 SACRAMENTO WWW.FRIGOLAW.COM THE BASICS OF INSURANCE BAD FAITH I. WHAT IS INSURANCE BAD FAITH? A. Basic Definition First Party Insurance Bad Faith Refusal to pay a claim without a reasonable basis or, even if insurer has a reasonable basis for denial, failing to properly investigate the claim in a timely manner. B. Types of Conduct Which May be Bad Faith 1. Deceptive practices or deliberate misrepresentations to avoid paying claims 2. Deliberate misinterpretation of records or policy language to avoid coverage 3. Unreasonable litigation conduct 4. Unreasonable delay in resolving claim or failure to investigate 5. Use of improper standard to deny a claim 6. Arbitrary or unreasonable demands for proof of loss 7. Abusive and coercive tactics to settle claim 8. Compelling an insured to contribute to settlement 9. Failing to thoroughly investigate the claim in accordance with your own procedures 10. Failing to maintain adequate investigative procedures 11. Failing to disclose policy limits and explain applicable policy provisions or exclusions C. Sources of Bad Faith Law 1. Common law 2. State legislation 3. State Regulation 1 The information contained herein is for general {00555225;v1 } information only, is not legal advice, and is not intended to create an attorney-client relationship. D. Conduct Occurring After Litigation is Filed may be Considered 1. “White” Bad Faith and “White Waivers” The California Supreme Court found that an insurer can be held liable for bad faith conduct occurring during litigation between the insurer and the insured. White v. Western Title Insurance Co., 710 P.2d 309 (Cal. 1985). Finding that the contractual relationship between the insurer and the insured does not end with when litigation starts, the found: When plaintiffs filed suit, defendant responded with a motion for summary judgment. After losing that motion, defendant was faced with both a ruling of the trial court rejecting its narrow reading of the policy and a unanimous body of case law establishing liability for negligence. Defendant nevertheless offered only nuisance- value settlements, and made no attempt to appraise plaintiffs’ loss until the issue of liability had been tried and decided in plaintiffs’ favor. Subsequent to this decision, insurers began obtaining “White waivers” in the course of mediation or settlement discussions to prevent allegations that conduct in the discussions could constitute bad faith. E. Unenforceable Provisions One potential source of bad faith claims is attempting to enforce a provision of an insurance policy which is not enforceable. Provisions contained within the policy may still be unenforceable if they are contrary to the law or impossible of performance. F. California Bad Faith Law California is generally recognized as a leader in bad faith insurance law. Many aspects of bad faith which have been adopted in the majority of states began in California. California has addressed bad faith insurance conduct through both legislation (unfair claims practices) and by common law (implied covenant of good faith and fair dealing). G. California Bad Faith Statutes In 1972, California adopted its Unfair Claims Practices Act which sets forth specific types of conduct which are considered by definition unfair. In its present form, Section 790.03 of the California Insurance Code provides in part as follows: 2 The information contained herein is for general {00555225;v1 } information only, is not legal advice, and is not intended to create an attorney-client relationship. The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance: (h) Knowingly committing or performing with such frequency as to indicate a general business practice any of the following unfair claims settlement practices: (1) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverages at issue. (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies. (3) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims arising under insurance policies. (4) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the insured. (5) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. (6) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds, when the insureds have made claims for amounts reasonably similar to the amounts ultimately recovered. (7) Attempting to settle a claim by an insured for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application. (8) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured, his or her representative, agent or broker. (9) Failing, after payment of a claim, to inform insureds or beneficiaries, upon request by them, of the coverage under which payment has been made. (10) Making known to insureds or claimants a practice of the insurer of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration. 3 The information contained herein is for general {00555225;v1 } information only, is not legal advice, and is not intended to create an attorney-client relationship. (11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information. (12) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. (13) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for the denial of a claim or for the offer of a compromise settlement. (14) Directly advising a claimant not to obtain the services of an attorney. (15) Misleading a claimant as to the applicable statute of limitations. Although the California Supreme Court initially held that a private right of action existed under the Unfair Claims Practices Act for both first and third party claims, Royal Globe v. Superior Court, 592 P.2d 329 (Cal. 1979), it subsequently reversed this decision for both third party claims, Moradi-Shalal v. Fireman’s Fund Ins. Cos., 758 P.2d 58 (Cal. 1988), and first party claims, Zephyr Park, Ltd. v. Superior Court, 262 Cal. Rptr. 106 (Ct. App. 1989). Thus, neither an insured nor a third party beneficiary may bring an action against an insurer for violations of the Unfair Claims Practices Act, although as noted below, the common law action of breach of implied covenant of good faith and fair dealing most likely applies to violations of the Act. Shortly after the California Supreme Court disavowed a private right of action under the Unfair Claims Practices Act, California voters adopted Insurance Code Section 1861.03(a) which provides: The business of insurance shall be subject to the laws of California applicable to any other business, including, but not limited to, the Unruh Civil Rights Act (51-53, inclusive, of the Civil Code), and the antitrust and unfair business practices laws (Parts 2 (commencing with 16600) and 3 (commencing with 17500) of Division 7 of the Business and Professions Code). H. California Common Law An insured can sue an insurer for breach of the implied covenant of good faith and fair dealing. Communale v. Traders & General Ins. Co., 328 P.2d 198 (Cal. 1958). 4 The information contained herein is for general {00555225;v1 } information only, is not legal advice, and is not intended to create an attorney-client relationship.

Load more