Everyone knows that relationships between insurance companies and their policyholders may not always be rosy. Nevertheless, insurance companies have a duty of good faith and fair dealing. Insurance companies must fully investigate insurance claims, timely disburse payments, and not abuse bargaining position over the insured. When insurance companies fall short, a claimant may file a bad faith insurance claim to try to recover damages.
Ohio law on bad faith is distinct from many other states. For example, Ohio does not have a cause of action for bad faith breaches of insurance contracts. Instead bad faith is encapsulated in a tort cause of action that is distinct from breach of contract claims. Also, the law on bad faith is not statutory like many other states. The law on bad faith is found in Ohio case law.
Types of Bad Faith Claims and Denials
- Life insurance claims
- Disability claims
- Business insurance claims
- Fire loss
- Wind and hail damage
- Home insurance claims
- Auto insurance claims
- Health insurance claims
What Must Insurance Companies Do to Avoid Bad Faith?
Insurance companies must conduct full, thorough, independent, and timely investigations in handling the claim. Decisions should be made efficiently unless there is reason for delay due to inaction on the part of the policyholder. Typically, the insurer should make a decision within 6 months to mitigate accusations of unreasonableness.
A claimant must prove bad faith on the part of the insurance company by showing there was no “reasonable justification” for its actions. Some examples of unreasonable justification include not interviewing witnesses and not sufficiently investigating the case. An insurance company must pursue all leads and strive to reach the right answer, not the answer that would get them off the hook for disbursing benefits. The insurance company should reach a decision based on the totality of the evidence rather than cherry-picking the pieces of evidence that bolster the argument it would prefer to advance.
What Shows Lack of Unreasonable Justification?
In general, Ohio case law suggests a number of factors in considering the totality of the evidence:
- Failure to properly investigate
- Failure to pursue all leads
- Failure to interview witnesses
- Failure to investigate insured’s alibi
- Exploiting the insured’s vulnerable position — for example, pressuring settlement when insured is disabled, injured, or financially distressed.
- Offering unfair settlements
- Undervaluing claims
- Making the process more difficult by ignoring attempts at communication, misrepresenting policy terms, or requiring unnecessary paperwork
- Unreasonable delay in decision-making, investigation, and payment
What Damages Are Available to Bad-Faith Insurance Claimants?
If the policyholder can show bad faith, then he or she can receive the benefits and compensatory damages flowing from the insurance company’s bad faith denial of benefits. These could include emotional distress, economic damages, and sometimes attorney fees and court costs.
The standard to get punitive damages, however, is much more stringent since it is meant to punish the company. To obtain punitive damages, a policyholder must show that the insurer acted with “actual malice, fraud, or insult.” Showing conscious disregard may be enough. Awarding attorneys fees could be a part of punitive damages.
Bad-Faith Insurance Claim Attorneys Protect the Insured's Interest
Making a claim against an insurance company can be daunting for a policyholder. Evaluating the factors that weigh into reasonable justification can be nuanced and tricky. Attorney Tom Robenalt is experienced in bad faith insurance claims and can help you or a loved one get the compensation deserved. Contact our Ohio law offices at (216) 223-7535 or fill out our online form today for a free and confidential consultation.