Paying too little far too late is a plague with modern property insurance adjustment. The cause is claims management providing too little line payment authority with qualified field adjusters. The lack of qualified field adjusters or qualified field adjusters with not enough payment authority is caused by bean counter and cost control financial insurer executives pushing lower claims payment severity initiatives and processes over obligations of good faith to the insurance customers suffering losses.
As I am studying the pre-verdict pleadings in the $18 million bad faith verdict, reported in $18 Million Bad Faith Verdict Regarding Mobile Home Loss, it is obvious the insurance company botched the adjustment, paid far too little, and then was trying to make excuses that it was “just a mistake” rather than accept responsibility for its actions. The policyholders’ brief in opposition to the insurance company’s motion for directed verdict noted in part:
Put simply, a jury could reasonably find that Defendants, including and specifically Global Indemnity Group, LLC (‘Defendant Global’), knowingly refused — for years — to properly investigate the claim and pay benefits owed under Plaintiffs’ homeowners’ policy (‘Policy’). First, paying what was owed under the contract (roughly three years after the lawsuit was filed and shortly before trial) is not a defense to breach of contract, it is an admission. Regardless, Plaintiffs have presented evidence of additional damages resulting from Defendants’ breach of their contractual obligations under the Policy. Second, on Plaintiffs’ bad faith claim, the evidence presented overwhelmingly supports the finding that Defendants’ nearly five—yet delay in paying what was owed was not a mistake, but quite deliberate. Finally, substantial evidence supports a finding that Defendant Global was directly responsible for the handling of Plaintiffs’ claim and, alternatively, is the alter ego of ARIC….
…Defendants continue to argue their belated payment of Policy benefits precludes a finding of breach of contract. But putting the proverbial cookie back in the cookie jar, years after being sued for refusing to do so, is not a defense. Were it otherwise, insurers (and any other party to a contract) could violate their contractual obligations with impunity, secure in the knowledge that paying what was owed in the first place will grant them immunity. On the contrary, paying the benefits sought by Plaintiffs’ lawsuit, which Defendants contend were not paid due to an oversight, concedes the only remaining elements in dispute must be resolved in Plaintiffs’ favor: ‘Defendants fai1[ed] to pay all or part of a loss covered by the policy’ and ‘the amount of the covered loss that Defendants failed to pay’ is at least $142,146.38 (the amount of Defendants’ October 2023 payment)? That Defendants vitiated the need for Plaintiffs to actually collect on this amount does not change the fact that Defendants owed — but wrongfully failed to pay — this amount. This is especially true considering the facts that (1) Plaintiffs are also entitled to prejudgment interest 0n this amount, Which the parties have stipulated is to be resolved by the Court and (2) Plaintiffs are otherwise only seeking $1 in damages for breach of contract….
This argument by the insurance companies, in this case, is similar to other insurance companies’ desire to obtain a “get out of jail free card” after paying significantly more after appraisal. It is purely a technical and flawed argument to say that there is no breach of contract since the insurer paid prior to a court judgment. The policyholders in this case noted the absurdity of the argument since paying the amount owed three years after the loss certainly is not paying the full amount owed in a prompt manner. Technically, the insurance company does not have to pay on the contract until 30 or 60 days after a judgment per common policy language. It would be absurd to say that an insurer could or should escape bad faith culpability just because it timely paid after a judgment.
In some cases, insurers argue that they did not pay because they had a reliable expert who said they owed nothing. This was not the case here because the insurers disregarded their expert:
Defendants continue to ignore that this dispute was never about a ‘disparity in estimates for the scope and cost of repairs.’ Rather, Plaintiffs submitted an estimate for over $160,000 in damage and Defendants paid nothing. Further, while Defendants may ‘rely on expert opinions’ and their estimates, the evidence shows Defendants’ expert (Mr. Haynes) submitted a competing estimate for roughly $27,000, Defendants disregarded it, and instead paid nothing.
Finally, the insurance company must base its refusal to pay on a “reasonable” investigation under California law. This means a full investigation, which is not outcome-oriented and with a qualified expert asked to provide an opinion about the reasons for the denial. The policyholders noted the following about this issue:
Additionally, the jury has now heard the testimony of Mr. Haynes, the ‘independent expert’ whose ‘cost of repair estimates’ Defendants purportedly relied on. If there was one portion of Mr. Haynes’s testimony that was entitled to credibility, it was his repeated and unequivocal assertions that he was not qualified — or even expected — to evaluate the damage to Plaintiffs’ home.
Those wishing to study this topic further should read Caselaw, Statutes, and Treatises All Agree: Insurers Have a Duty to Fully and Thoroughly Investigate Each Claim in Good Faith, and What Are the Good Faith Claims Handling Rules Insurance Companies Must Follow? Adjusters Must Do These or Be Guilty of Bad Faith.
This case is still ongoing, and I am certain more post-trial motions will be filed if the matter is not resolved with a settlement. In the meantime, there are important lessons to be learned from the study of this case. To me, this case is a classic example of an insurance company failing to pay a debt to its customers for the full amount owed until far too late a time. Delay in payment and debt to those in need following a disaster is a chronic problem that the property insurance industry needs to correct. It is almost as if the property insurance industry does not care what happens after a loss and is instead fully focused on obtaining premiums timely and fully at the point of sale.
Thought For The Day
Creditors have better memories than debtors.
—Benjamin Franklin
