A. Insurer Consideration of All Available Information
B. Biased or Incompetent Medical Claims Reviews
Bad faith insurance law is premised on the legal principle that there is an
implied covenant of good faith and fair dealing in every insurance
contract that prohibits either party from preventing or injuring the other
party's right to receive the benefits of the contract.the
Court recognized that "the insured's interests must be given 'equal
consideration' with those of the insurer, or as it is often expressed 'at
least equal consideration to win one must show:(1) a pattern of misconduct-that it happens all the time,
or (2) that the insurer's conduct demonstrated an overarching intent that
focused on denying or minimizing claims payments. Generally, discovery
in a bad faith action will explore the insurer's policies or practices that
involve institutional bad faith.
DISCOVERY OF OTHER ACTS OF SIMILAR CONDUCT
DISCOVERY OF OTHER ACTS OF SIMILAR CONDUCT
A. Evidence of First-Party Bad Faith and Wrongful Intent
B. Evidence of Pattern of Practice of Wrongful Claims Handling
C. Evidence of Recidivism and Right to Punitive DamagesIt is appropriate, in applying the test, to determine whether a claim was
properly investigated and whether the results of the investigation were
subjected to a reasonable evaluation and review...."covenant is implied in an insurance contract that neither party will do
anything to injure the rights of the other in receiving the benefits of the
agreement. This covenant includes a duty to settle claims without
litigation in appropriate cases."
Reasonable basis for denial of
(1) the absence of a reasonable basis for denial of
policy benefits and (2) the knowledge or reckless disregard of a
reasonable basis for denial. In explaining the test, the court emphasized
that a claim must be properly investigated and subjected to reasonable
evaluation and reviewtest is our conclusion that the knowledge of the lack of a
reasonable basis may be inferred and imputed to an insurance company
where there is a wreckless disregard of a lack of a reasonable basis for
denial or a wreckless indifference to facts or to proofs submitted by the
Good faith and fair dealing encompass qualities of decency
The insurer's obligations are ... rooted in
their status as purveyors of a vital service labeled quasi-public in nature.
Suppliers of services affected with a public interest must take the public's
interest seriously, where necessary placing it before their interest in
maximizing gains and limiting disbursements.... [A]s a supplier of a
public service rather than a manufactured product, the obligations of
insurers go beyond meeting reasonable expectations of coverage. The
obligations of good faith and fair dealing encompass qualities of decency
and humanity inherent in the responsibilities of a fiduciary. Insurers hold
themselves out as fiduciaries, and with the public's trust must go private
responsibility consonant with that trust
Procedures that emphasizes minimizing insurance claims to the
There are two different types of evidence in bad faith claims. The first
type involves only the actions of the claims personnel and seeks to show
that their actions were outrageous and caused damage to the plaintiff.
The second type of evidence is called "institutional bad faith."
"Institutional bad faith" is a corporate philosophy, implemented in a series
of procedures, that emphasizes minimizing insurance claims to the
detriment of policyholders.
Bad faith because of a direct pecuniary interest in optimizing the insurer's financial condition by keeping claims costs down
the Nevada Supreme Court
upheld a finding of bad faith because of a direct pecuniary interest in
optimizing the insurer's financial condition by keeping claims costs down.
When an insurer knowingly communicates goals to its employees that
conditions them to minimize claims, that violates the rule requiring an
insurer to give equal consideration to an insured's interests. Evidence of
insurer goals that adversely affect the payment of claims establishes
knowledge in a bad faith action
Insurers have established goals to deny or minimize medical claims
In the guise of "medical cost containment, " insurers have established
goals to deny or minimize medical claims. These goals are implemented
through medical claim review procedures that are performed either by
medical providers, insurance company personnel or third-party vendors.
Often, the insurer will order an independent medical examination (IME),
Absence of a reasonable basis for denial of policy benefits
F]or proof of bad faith, there must be an absence of a reasonable basis for denial of policy benefits [or failure to comply
with a duty under the insurance contract] and the knowledge or reckless
disregard [of the lack] of a reasonable basis for denialthe relationship of insurer
and insured is inherently unbalanced; the adhesive nature of insurancecontracts places the insurer in a superior bargaining positionwhich is conducted by a medical provider who has an ongoing
relationship with the insurer and whose reports typically favor the insurer.
At other times, medical claim reviews may be conducted by an insurance
company employee whose performance is measured by the employee's
ability to reduce medical costs. Also, medical utilization review
companies, whose sole objective is to cut medical costs for their clients,
are used by insurers.
The company cannot later seek to justify its denial by gathering information it should have had in the first place
Once the bad faith has occurred, once the duty to use good faith in
considering insurance claims has been breached, the insurance
company cannot later seek to justify its denial by gathering information it
should have had in the first place. "An insurer purchases insurance and
not an unjustified court battle when he enters into the insurance
contract."The use of biased or incompetent medical claim reviews establishes
wrongful intent in a bad faith action. Increasingly, courts have recognized
that medical claim reviews conducted by persons that are biased or
incompetent lead to predictably arbitrary claim decisions.
License to steal.
The eventual payment of a plaintiff's claim does not extinguish the wholly
separate tort claim of bad faith.an insurer's violation of its duty of good faith and fair dealing
constitutes a tort, even though it is also a breach of contract. Such
tortious conduct is demonstrated where there is unreasonable delay in
performing under a contract, including delays in settlement under a
liability policy.In the so-called breach of contract actions that smack of tort we do not
think it is enough just to permit the defendant to pay that which the
contract required him to pay in the first place. If this were the law,
defendant has all to gain and nothing to lose. If he is not caught in the
fraudulent scheme, then he is able to retain the resulting dishonest
profits. If he is caught, he has only to pay back that which he should
have paid in the first place.
Breach of contract
Evidence of other acts of similar conduct establishes elements of
first-party bad faith and wrongful intent. In a bad faith action, an insurer's
other acts of similar conduct is important evidence in proving the
defendant's state of knowledge.While evidence of other acts may not be used to prove a
defendant's character, "[i]t may, however, be admissible for other
purposes, such as proof of motive, intent, preparation, plan, knowledge,
identity, or absence of mistake or accident."the evidence was relevant in proving intentAs the defendant rarely admits the crucial element of
intentional wrongful conduct, it must be established by the plaintiff and
proved by circumstantial evidence
Proof of a knowing violation will make plaintiff's job that much
easier, in cases where a knowing violation is difficult to establish,
knowledge can be proved circumstantially. Discovery aimed at
determining the frequency of alleged unfair settlement practices is
therefore likely to produce evidence directly relevant to the action.Courts uniformly hold that evidence of recidivism is relevant and
admissible to establish the plaintiff's entitlement to punitive damages, as
well as to determine the extent of punitive damages necessary to deter
future misconduct. In reviewing punitive damages cases,
Punitive damages may properly be imposed to further a State's legitimate interests in not only punishing unlawful conduct
Punitive damages may properly be imposed to further a State's legitimate interests in not only punishing unlawful conduct but also to deter its repetition.Punitive damages may properly be imposed to further a
State's legitimate interests in not only punishing unlawful conduct but
also to deter its repetition This happens offten when a defendant shows no remorse for his acts .
Additional resources provided by the author
Howard Roitman, Esq.
8921 W. Sahara Ave.
Las Vegas, Nevada 89121