Along with my colleague Patrick McGinnis, we are handling a number of hail claims across the country. As in the vast majority of claims that result in filing a lawsuit, we always seek to include causes of action for both breach of the insurance contract and failure to follow the duty of good faith and fair dealing in claims handling. The biggest challenge we face in maintaining the claim for breaching the duty of good faith and fair dealing remains the policyholders’ failure to timely respond to carrier requests for documents and/or examinations under oath.
What do you mean?
The scenario is common enough to lend itself to a general description and not pick-on any particular policyholder:
- Policyholder discovers damage, reports the claim, and insurance carrier assigns an adjuster within a week of loss being reported.
- Within a few weeks of the reported loss, insurance carrier sends an estimate to the policyholder.
- The correspondence sent with the insurance carrier’s estimate – or relatively soon after sending the estimate – the carrier requests information/documents (maintenance records, prior damage information, etc.) from the policyholder.
- Instead of responding to the carrier that the requested information either does not exist or remains already in the carrier’s possession, the policyholder simply fails to respond.
- Three months later, the carrier sends another letter referencing the prior letter, and again requests the same information.
- Three months later, repeat bullet point 5. In addition, carrier now requests an examination under oath.
- Repeat 5 and 6 in regard to EUO request.
- Before one knows it, a year has passed and the carrier has not paid the claim.
What next?
Because a year has passed and the carrier has not paid the claim, the policyholder remains convinced they should receive full claim payment and “bad faith damages” due to the insurance carrier’s delay. The challenge remains, of course, that too much of the delay falls squarely on the policyholder.
In this all-too-common scenario, policyholder professionals face little likelihood of having a satisfied client even with payment of the underlying claim itself. As a trial lawyer, I can tell you that trial court judges are more and more willing to dismiss breach of the duty of good faith and fair dealing causes of action when a significant delay results from the policyholder.
What Does This Mean For Me?
As a policyholder, it’s always a good idea to retain a policyholder professional as soon as reasonably possible when faced with a property damage insurance claim. If you are a public adjuster and get retained after the policyholder has handled the claim on their own for some time, send a letter to the carrier requesting any outstanding information requests to the policyholder. Then, you at least have the documentation and can help the policyholder comply with the carrier’s information requests. If the claim does not receive proper payment and a lawsuit must be filed, we want to have done all we can to preserve all the policyholders’ rights.
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