In a world of first-party insurance claims and disputes, we hear and use the term "bad faith" almost every day. The term occurs regularly when contractors, public prosecutors and lawyers try to settle a first-party insurance claim. If disputes are necessary, then bad faith often becomes a clear statement made on behalf of the policyholders. Because "bad faith" is a clear statement in court, but the term itself is contradictory, and in advance it has an accusatory tone. It also has different meanings based on the state in which the claim arises, and in some states it is incredibly difficult to prove an insurer's bad faith through litigation because it may require evidence of intentional dishonesty or oppressive behavior from the insurer. 1
Given the opposite nature of the term "bad faith", avoiding this term before disputes could benefit policyholders. I know this seems like a crazy idea, but think about it – in general, bad faith is an insurer's failure to act in good faith and with fair trade. As a policyholder advocate, we want to give the insurer all possible opportunities to act in good faith. If and when the insurer does not do so, such a failure can be pointed out in a non-controversial way by advising the insurer that they are not acting in good faith and not treating their insured with fair trade. At its most basic level, this has the same meaning as claiming unfaithfulness or actions of the insurer, but shifts the tone of the conversation from one who is accused to one who is cooperative.
When an insurance company is accused of bad faith during the claims handling process, they have a reason to become defensive. they can escalate the claim to a higher level within the insurance company. they can point the finger at the policyholder later to try to "set up" an unfaithful statement; or they believe that the policyholder will bring an action. Each of these cases makes it more difficult for policyholders to settle their claims. For example, some guidelines for handling claims for damages direct adjuster to report a claim or threatened allegation of bad faith to the company's internal legal department and / or the adjuster's superior. The claim of unfaithful or threatened unbelievable claim escalates the command and certain additional procedures are implemented, which may delay the timeline for resolving the policyholder's claim and possibly result in a change of adjuster assigned to the claim. This does not benefit the policyholder.
Similarly, when an unfaithful accusation is made in advance and the insurer believes that it did not act in bad faith, the insurer may later point the finger at the insured and argue that the insured acted in a negotiated manner to try to make a claim. disbelief in the insurer. I recently saw this scenario play out where a public adjuster participated in an inspection of a damaged property with the insurer's adjustment and engineer. The public adjuster became angry when the insurer's engineer stopped considering the public adjuster's perspective on the extent of hail damage to a roof, then the public adjuster accused the insurer of acting in bad faith and continued to record the inspection on video. In mediation, the interaction between the public adjuster and the insurer's adjuster became a problem, as the insurer claimed that the public adjuster became harmful to the insurer and such malice was the reason why the parties failed to resolve the insurance claim before disputes. This did not benefit the policyholder.
A privilege may also be attached to the insurer's internal correspondence and documents created after the date the insurer expected litigation. This privilege effectively prevents policyholders from obtaining important documents during the detection of disputes. The privilege usually arises based on the date the insurer's reasonably expected disputes, which in some cases may mean that the privilege is attached to all documents created after the date the policyholder's representative claims that the insurer is acting in bad faith. When this happens, lawyers face the added obstacle of arguing that the expectation of litigation does not apply to the alleged privileged documents in the policyholder's claim, which can lead to months of business practice only to obtain an unfavorable order from the court. the position of the insurer. This does not benefit the policyholder.
Each of these scenarios supports a language shift from accusing an insurance company of acting in "bad faith" to asking the insurer to act in "good faith." By asking the insurer to act in good faith in advance, the policyholder's lawyer gives the insurer additional opportunity to act in good faith in a non-controversial manner. This can prevent the adjuster from feeling attacked or defensive; it encourages cooperation; it could avoid the requirement being increased to higher levels within the insurance company. it could avoid the insurer claiming that the policyholder "suspended" a claim of infidelity. and it can prevent important documents and correspondence from being privileged in the event of disputes.
1 See e.g. Columbia Nat. Ins. Co. v.Freeman 64 S.W.3d 720 (Ark. 2002).