An Arkansas insurer who wrongfully denies a property insurance claim and does not act in good faith may be subject to a bad faith lawsuit. An article in the Arkansas Law Review, An Examination of Bad Faith Insurance Tort Cases in Arkansas,1 noted the Arkansas First Party Bad Faith Act:
First-party bad faith developed as an extension of the third-party bad faith doctrine and has been recognized in Arkansas since at least as early as 1984. The purpose of recognizing the tort was to provide an additional remedy for intentional wrongdoing. First-party bad faith represents a violation of an insurer̵
7;s duty to exercise “due care and strict performance and utmost good faith,” and it occurs when an insurer affirmatively engages in dishonest, malicious, or oppressive conduct to avoid fair dealing. obligation to the insured; this is sometimes characterized as hatred, malice, or a vengeful spirit in older or more serious cases. “The legislation does not define the terms of the insurance contract; instead, it is about whether and how the insurance company complies with the terms of the contract.’ If the insurer fails to comply with the insurance contract in good faith, the law provides remedies, including punitive damages. There are many examples in Arkansas cases of what does and does not constitute bad faith.An element of scienter is required to prove first-party bad faith. Evidence of an actual intent to engage in dishonest conduct to avoid an equitable obligation to an insured will support a claim of first-party bad faith. Willful blindness also provides the necessary researcher. Finally, proof of reckless indifference may also serve to satisfy the scienter requirement, as reckless indifference may give rise to damages.
The burden of proving bad faith may not be light, as one court said:
The Court now turns to the plaintiffs’ bad faith damages claim. The standard for establishing a claim of bad faith on the part of an insurance company is rigorous and difficult to satisfy…To state a claim of bad faith, a plaintiff must allege that the defendant insurance company engaged in affirmative misconduct that was dishonest, harmful or oppressive…'[B]ad tro” is defined as “dishonest, malicious, or oppressive conduct carried out with a state of mind characterized by hatred, malice, or a vindictive spirit.” Negligence, poor judgment, nightmarish bureaucracy, rough-and-tumble, delaying investigations for months, and failure to provide a reason for the company’s initial refusal to pay does not constitute bad faith.2
Hardball and unlawful delay are certainly evidence of failure to act in good faith. All insurance companies would agree. So it’s hard to reconcile the rhetoric found in this case because it defines bad faith as what insurance adjusters have learned not to do.
The bottom line is that Arkansas recognizes first-party bad faith cases. But proving what Arkansas judges consider bad faith may be a higher standard than what insurance adjusters are taught about bad faith.
Today’s thought
Treat those who are good with kindness, and also treat those who are not good with kindness. In this way, goodness is achieved. Be honest with those who are honest, and also be honest with those who are not honest. In this way, honesty is achieved.
– Lao Tzu
1 Nathan Price Chaney, An Examination of Bad Faith Insurance Tort Cases in Arkansas64 Sheets. L. Rev. 853 (2011).
2 Bryant v. State Farm Fire & Cas. Co., no. 3:12-cv-00147, 2013 US Dist. LEXIS 50883, 2013 WL 1445482 (ED Ark. Apr. 9, 2013).
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