Bad duck insurance is a unique legal term art for United States law (but with parallels elsewhere, notably Canada) that describes claims of torture that an insured person may have against an insurance company for bad acts. Under United States law, insurance companies owe obligations in good faith and fair to those they insure. This obligation is often referred to as the "implied agreement of good faith and fair deal" which is automatically enshrined by legal operations in every insurance contract.
If the insurer violates the agreement, the insured person (or "policyholder") may sue the company for a claim of claim in addition to the breach of the standard contract claim. The contract-tort distinction is important because as a matter of public policy, punitive or sample punitive damages are not available for contract claims, but are available for claims of litigation. In addition, consequential damages for breaches of contracts are traditionally subject to certain restrictions that do not apply to tort actions (see Hadley v. Baxendale ). The result is that a plaintiff in a bad insurance case may be able to recover an amount greater than the original nominal value of the policy, if the insurance company's behavior is terrible.
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Most of the laws governing the insurance industry in the US are country-specific. In 1869, the United States Supreme Court held, in Paul v. Virginia (1869), that the United States Congress has no authority to organize insurance under its control to regulate trade.
In the 1930s and 1940s, a number of US Supreme Court rulings expanded the interpretation of the Trade Clause in various ways, so that federal jurisdiction over interstate commerce can be seen as an extension of insurance. In March 1945, the United States Congress strictly reaffirmed its support for state-based insurance regulation by passing the McCarran-Ferguson Act stating that no law passed by Congress should be interpreted to undo, damage or substitute for the law enacted by the State of insurance.. As a result, almost all insurance regulations continue at the state level.
Such regulation generally comes in two forms. First, each state has an "Insurance Code" or similar law that tries to provide comprehensive regulations on the insurance industry and insurance policies, the type of special contract. Country insurance codes generally mandate special procedural requirements to start, finance, operate, and undermine insurance companies, and often require insurance companies to be overcapitalized (relative to other firms in the larger financial services sector) to ensure they have enough funds to pay claims if the country is hit by natural and man-made disasters at the same time. There is usually a Department of Insurance or Insurance Division that is responsible for applying the state insurance code and enforcing its provisions in the administrative process of the insurance company.
Second, the legal interpretation of insurance contracts in disputes between policyholders and insurers occurs within the context of the above-mentioned insurance law as well as general contract law; the latter still exists only in the form of judicial law cases made by judges in many states. Some countries like California and Georgia have gone a step further and are trying to codify all of their contract law (not just insurance laws) into the law of the law.
Initial insurance contracts are considered to be contract like any other, but the first English (see uberrima fides) and then American courts recognize that insurance companies occupy a special role in society based on the implied or implied promise of peace of mind, as well as the severe vulnerability of the insured as they actually make a claim (usually after a loss or a terrible disaster).
In turn, the development of the cause of modern action for bad faith insurance can be traced to an important decision of the California Supreme Court: Comunale v. Merchants & amp; General Ins. Co. . Comunale is in the context of third party liability insurance, but California then extends the same rules for first-party fire insurance at Gruenberg v. Aetna Ins. Co. .
During the 1970s, insurers argued that initial cases should be read as holding that it is a bad faith to deny claims only when the insurer has knew that it has no reasonable basis to deny the claim (that is, when the insurer has obtained information indicating a potentially closed claim and deny it as well). In other words, they argue that only the deliberate persecution of the insured must be actionable in bad faith, compared to the overly negligent claims . In 1979, the California Supreme Court disputed the argument and further expanded the scope of the tort by stifling that insufficient investigation of claims that could be followed up in the lawsuit as a breach of the implied agreement of goodwill and fair deal.
Other state courts are beginning to follow in California's footsteps and declare that a lawsuit is available to policyholders who can build bad faith on the insurer. In the late 1990s, courts in nearly thirty states recognized the claim. In nineteen states, the state legislature becomes involved and passes laws that specifically endorse bad faith claims against insurance companies.
Maps Insurance bad faith
Bad faith is defined
The insurance company has many duties to the policy holder. The types of applicable tasks vary depending on whether the claim is considered a "first party" or a "third party." Poor faith can occur in both situations - improperly refusing to defend the lawsuit or by improperly refusing to pay a closed suit or claim settlement.
Poor faith is a fluid concept and is defined primarily by court decisions in legal cases. Examples of bad faith include an undue delay in handling claims, inadequate investigation, refusal to defend the lawsuit, threats against the insured, refusing to make a reasonable settlement offer, or making unreasonable interpretations of the insurance policy.
First party
A common first-party context is when an insurer writes insurance for a damaged property, such as a home or car. In this case, the company is required to investigate the damage, determine whether the damage is covered, and pay the correct value for the damaged property. Poor faith in the first-party context often involves improper investigation and assessment by the insurer of the damaged property (or its refusal to even acknowledge the claim altogether). Poor faith can also arise in the context of first-party coverage for personal injuries such as health insurance or life insurance, but such cases tend to be rare. Most of them are preferred by ERISA.
Third party
Third party situations (essentially, liability insurance) break down into at least two different tasks, both of which must be met in good faith. First, the insurance operator usually has an obligation to defend claims (or claims) even if most or most of the lawsuits are not covered by the insurance policy. Unless the policy is clearly structured so that defense costs "undermine" on policy limits (so-called "self-wasting", "waste" or "burning" policies), the default rule is that insurance companies should cover all defense costs regardless of coverage limits in fact. In one of his most famous decisions of his career (involving Jerry Buss's dreadful tackle on Transamerica), Justice Stanley Mosk writes: "[W] e can, and do, justify the duty of the insurance company to defend all 'mixed' measures prophylactically, as the obligations imposed by law to support the policy.To maintain meaningfully, the insurance company must immediately defend. [citation] To defend immediately, it must defend fully, Can not parse claims, divide those that are at least potentially covered from those who do not. "
Texas (and several other conservative states) follows the "eight-point rule" in which the obligation to defend strictly is governed by the "eight corners" of two documents: a complaint against the insured and the insurance policy. In many other countries, including California and New York, the duty to defend is ensured by also seeking the all facts known to the insurer from any source; if the facts when read in conjunction with the complaint indicate that at least one claim is potentially covered (ie, the complaint actually alleges the claim of the type promised by the insurer to be retained or may be altered due to a known fact), the obligation to maintain is triggered by it and the insurer must defend against the insured. This strong bias to find coverage is one of the major innovations of US law. Other common law jurisdictions outside the US continue to interpret much narrower coverage.
Furthermore, the insurer has an indemnity obligation, which is an obligation to pay an assessment of the policyholder, to the extent of coverage. However, unlike the obligation to defend, the obligation to indemnify only exists to the extent that the final verdict is for a closed act or omission, because at that time, there must be a clear factual record of a court decision or summary for the plaintiff's interest. reveals what part of the claimant's claim is actually covered by the policy (distinguished from a closed possibility). Therefore, most insurance companies run a lot of control over litigation.
In some jurisdictions, such as California, third party coverage also contains a third task, the obligation to settle fairly clear claims against policyholders within policy boundaries, to avoid the risk that policyholders may be hit with an assessment that exceeds the policy value (which is then decided by the plaintiff to be complied with a warrant for execution of the policyholder's assets). If the insurer infringes on the good faith of its duty to retain, indemnify, and resolve it, it may be liable for the entire amount of judgment the plaintiff obtains against the policyholder, even if the amount is excessive of the policy limit. This is holding the case of the landmark Comunale .
Litigation
US courts usually follow the American rules in which the parties bear the cost of their own lawyers without any law or contract, which means that in most countries, bad faith litigation should be self-financed by the plaintiff, either outside the pocket or through costing arrangements contingent. (Insurance policies in the US generally do not have a fee-transfer clause, so insurance companies can consistently use America's "bear own" default rules.) However, in California, plaintiffs who win over a lawsuit in action with a bad belief may be able to recover some of his attorney's fees separately and in addition to the assessment of damages against the defendant's insurance company, but only insofar as those costs incurred in recovering damages to the contract (ie, for breach of the terms of the insurance policy), as opposed to damage > tort (for breach of implied agreement). Surprisingly, the allocation of attorneys' fees between the two categories is own a fact question (which usually means going to the jury).
Assignment or direct action
In some US states, bad faith is even more complicated because under certain circumstances, the person in charge may eventually find himself in a court of law where he is directly sued by the plaintiff who sues the insured. This is allowed through two situations: assignment or direct action.
The first situation is when the insured is left in bad faith by the insurer's obligation to make a special settlement agreement with the plaintiff. Sometimes this happens after the trial, where the insured has tried to defend himself by paying the lawyer out of the bag, but goes to the verdict and loses (the actual situation in the case of the Comunale landmark); other times it happened before the trial and the parties agreed to hold an undeniable performance trial which resulted in the final decision and the verdict against the insured. However, the plaintiff agrees not to actually execute the final decision against the insured in exchange for the assignment of a transferable component of the cause of the insured's action against the insurer. In some states, this agreement is named after the case of country landmarks that adopt the Comunale doctrine (either directly or from one of its progenies). For example, in Arizona, they are known as Damron agreements.
The second situation is where the plaintiff does not need to get the verdict first, but proceeds directly against the insured insurance company under the state law that endorses such "direct action". This law has been enforced as constitutional by the US Supreme Court.
Damage
In many states, either an equal lawsuit or law provides for redress due to bad faith to further encourage insurance companies to act in good faith against their insured.
Poor legal liability can result in great rewards for punitive damages. A famous example is State Farm Mutual Auto. Ins. Co v. Campbell , in which the US Supreme Court overturned a $ 145 million jury award for compensation against State Agricultural Insurance. Bad faith cases may also be slow, at least in the third-party context, because they always depend on the outcome of the underlying litigation. For example, Campbell's 2003 decision involves handling State Farm litigation resulting from a fatal car accident in 1981, 22 years earlier.
Toxic mushrooms are a common cause of lawsuits in bad faith, with about half of the 10,000 cases of poisonous mushrooms in 2001 filed against insurance companies on bad faith grounds. Prior to 2000, such claims were rare, with relatively low payments. An important lawsuit occurred when the Texas jury awarded $ 32 million (later reduced to $ 4 million). In 2002, a suit was settled for $ 7.2 million.
International comparison
No other common law jurisdiction has reached the United States in recognizing a separate lawsuit based on poor insurance treatment of the insured, although Canada has come close enough.
In 2002, the Supreme Court of Canada upheld the verdict of punitive damages for the handling of bad faith insurance claims, but expressly refused to recognize the bad faith of the insurance as an independent offense under Ontario law, and instead stated that when a very serious violation of the company against the contract into "actionable errors" (something different from tort) that justifies the deterioration of punishment. Since then, a Canadian appellate court, the New Brunswick Court of Appeal, has gone a step further and has firmly embraced the American concept of bad insurance crime.
New Zealand's highest court in 1998 refused to decide whether to impose extra-contractual tort responsibility for handling poor faith claims.
The United Kingdom has refused to impose tort with bad faith insurance, and also refused to impose wider consequential damages for handling poor faith claims.
The Australian Law Reform Commission considers but refuses to apply bad insurance torts when drafting the Insurance Contract Act 1984. Since then, the Australian courts have consistently refused to legally impose what legislatures do not enact by parliament, where the latest example is when the Court of Appeals New South Wales refused to adopt bad duck insurance in 2007.
See also
- Uberrima fides
- Implicit agreement of goodwill and fair
References
Source of the article : Wikipedia
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