The Christchurch earthquakes and subsequent dealings with private insurers bring into stark relief the need for the appellate courts in this country to address the issue of what exactly good faith is – particularly in relation to insurance contracts which are still not honoured more than two and a half years after the event. Insurance policyholders need to be able to have confidence in the knowledge that the contracts which they have entered into – in good faith – have some tangible meaning and substance behind them. A doctrine with such ambiguity is not of much use to the desperate policyholder. Or even the Courts for that matter. A more tangible concept is called for. Issues of what constitute bad faith are much easier to define and have been defined by a number of jurisdictions around the world. Here are a selection of actions which Cantabrians have reported and which fall under the heading ‘bad faith’. Many of you will recognize a raft of them:
1. An insurer may be acting in bad faith if the insurer delays, discounts or denies payment without a reasonable basis for its delay, discounting or denial.
2. Failure of an insurer to acknowledge and reply promptly upon notification of a covered claim.
3. Failure of Insurer to pay a covered claim as a result to do a proper, prompt and thorough investigation as to reasonable liability and damages based upon all available information.
4. Failure of the insurer to affirm or deny coverage of claims within a reasonable time upon receipt of a claim and/or proof of a loss.
5. Failure to offer or attempt to undertake prompt, fair and reasonable evaluation of damages and equitable settlements of claims to insured, within a reasonable time, where liability is reasonably clear.
6. Where the insurer attempts to settle a claim for less than the amount to which a reasonable person would have believed he/she was entitled or attempts to substantially diminish a claim requiring an insured to initiate litigation.
7. Attempting to settle claims on the basis of an application and/or policy which was altered without notice, knowledge or the consent of the insured.
8. Making payment(s) for claims without accompanying statements indicating the coverage for which payment(s) are being made.
9. Failure of the insurer to promptly settle claims, where liability and coverage is reasonably clear under one portion of the insurance policy in order to influence settlements of coverage for another portion(s) of the policy.
10. Failure of the insurer to promptly provide reasonable explanation and basis when denying or making a compromise offer of claim settlement.
11. Requesting over burdensome documentation demands not required by the policy.
12. Using illegal and fraudulent investigative methods and procedures.
13. Using harassing, intrusive or demeaning investigative methods and procedures which victimize the insured. (Private investigators, et.c.).
14. Unjustified contention and/or “lowballing” regarding the value of a loss.
15. Intentionally withhold, misinterpret or misconstrue information and/or failure to not inform insured of provisions and covered benefits under the policy pertinent to the claim.
16. Attempts to indiscriminate measures, references and/or procedures that diminish or reduce the top line amount or value representing full payment of the claim.
17. Intentional or irresponsible non-disclosure and withholding of information, misinterpretation of file documents and/or policy provisions, that would be in favour of the claimant.
18. Unsubstantiated and unwarranted accusations of arson or abandonment of property.
19. Wrongful threats not to pay claims or to delay settlement.
20. Insurer advice to claimant not to hire a lawyer.
21. Treatment of clients represented by lawyers as insurer adversaries.
22. Treatment of clients and claimants as adversaries.
23. Failure to live up to or conform and comply with industry standards.
24. Using inaccurate or wrongful information of a factual or legal nature to diminish, deny or delay payment of a claim.
25. Not being forthcoming with facts regarding coverage to deny, delay or reduce the amount of the claim.
26. Using extreme undue persectution, wrongful and victimizing tactics and actions, meant to crush, threaten, thwart, intimidate, oppress, in order to scare away and get the claimant not to pursue a claim.
27. Changing or altering policy coverage without informing or receiving the consent of the insured.
28. Representation by an insurer that an investigation ‘of fact’ is taking place, knowing that no investigation is being done, in order to intentionally stop and dismiss an inquiry by a plaintiff, or plaintiff’s lawyer.
29. Biased investigation of that which is supposed to be neutral and unbiased.
30. Repeated and constant reference and intentional miscommunication and misrepresentation by the insurer downplaying the size of a claim.
31. The same claims person of an insurer handling conflicting and/or both sides of the same or related claims.
32. Deviating from the standard procedures called for in an insurer’s claims manual.
33. Attempting to prevent the court or an insured’s lawyer from securing a copy of the insurer’s claims manual.
34. Abusing and/or misusing the judicial court system in order to delay or settle in good faith, payment of a claim where liability to the claim is clear and the amount of the claim is reasonable, in order to delay insurers having to make payment of a claim e.g. failing to produce a timely statement of defence and using vexacious arguments for that failure.
35. Fraudulently misrepresenting and revealing various conflicting financial information that mischaracterizes the true financial information and status of an insurer.
36. Attempting to shift blame and responsibility of investigation of loss to the insured and away from the insurer.
37. Intentionally misinterpreting or misconstruing the law to the disadvantage of the insured and benefit of the insurer.
38. Unreasonable misinterpretation of policy language.
39. Taking undue excessive advantage of unlimited time when knowing there are no legal or regulatory time limitations established on alleged investigations of such matters or matters of fact.
40. Declaring a meeting to be “without prejudice” and then using the content of the meeting to the insurers advantage.
Good faith insurers look for ways to accept and pay claims properly and promptly…. Bad faith insurers unlawfully look for and find ways not to pay, delay or diminish and deny payment of claims.
This list is based on a U.S. article “Some Signs of Bad Faith Insurance Claims Settlement Practices” by FBIC www.badfaithinsurance.org
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