In New York and Vermont, to prove that an insurer has acted in bad faith, a plaintiff must provide a factual basis for claiming that the insurer did one or more of the following:
- Unreasonably denied the insured's claim
- Failed to conduct an adequate investigation
- Unreasonably delayed making a payment
- Deceived the insured
- Wrongfully refused to defend the insured from a third party's lawsuit
- Failed to provide a defense that was adequate
- Failed, without good reason, to settle a third party's lawsuit
Without a factual basis for such claims, however, a policyholder's assertion that an insurer acted in bad faith is likely to be dismissed in court. Whether the claim is dismissed with or without prejudice is left to the discretion of the judge. After dismissing without prejudice, the judge may allow the plaintiff to amend his or her complaint to include facts that support the claim.
Insurers know all-too-well that litigation is costly and time-consuming, so it is helpful that judges limit the amount of time plaintiffs have to amend their complaints.
Recently, a judge dismissed a bad faith claim against State Farm Insurance Company after finding that the plaintiff had not provided any facts supporting the assertion that the insurer "(1) lacked a reasonable basis for denying benefits and (2) knew or recklessly disregarded its lack of a reasonable basis."
However, the plaintiff's claim was dismissed without prejudice, and the judge gave her 20 days to amend her complaint to include some facts.
State Farm reportedly offered the policyholder a settlement for injuries suffered in an auto accident with an uninsured motorist. The policyholder's legal counsel later provided additional medical records to indicate that ongoing treatment was needed and should be covered by the insurer. State Farm offered $12,000 to settle the claim, but the opposing counsel claimed that more is due.
A recent article has details on the case.
For more on defending against bad faith auto insurance claims, please see O'Connor, O'Connor, Bresee & First's auto insurance defense overview.