A couple of weeks ago I wrote a blog post describing how policyholders can not apply insurance adjustment violations in good faith for acts such as failing to confirm communication or failing to confirm or deny coverage within a reasonable time after proof of loss 1 The post formulated that such enforcement capacity lies only with the insurance commissioner, according to TCA § 56-8-101 (c). 2 This limitation is quite annoying when policyholders call me and ask for help after insurance adjusters behave badly, but I can not help them deal directly with their poor treatment.  Despite the removal of previously favored opportunities for recovery, policyholders can still hold insurance companies liable for a particular breach of good faith. Under T.C.A. § 56-7-1
Insurance companies in this state, […] in any case when a loss occurs and they refuse to pay the loss within sixty (60) days after a request has been made by the holder of the insurance or trust bond on which the loss occurred, shall be obliged to pay the holder of the insurance or loyalty bond, […] 3
The recovery under this payment error is limited. First, the Charter sets out a number of procedural requirements, including a 60-day recovery period on demand and a legal conclusion that "the refusal to pay the loss was not in good faith and that failure to pay added additional cost, loss or damage […]." 4 This legally binding requirement means that coverage must be legally determined as existing and as deficient before recovery can be sought under this statute. More importantly, this lack of coverage must be shown to the court as from or demonstrable indifference to the interests of the insured ", and not just a disagreement on the scale. 5
Second, maximum recovery under TCA 56-7-105 may not exceed 25% of the insufficient amount, which is significantly less than treble damage available under previous recovery options. Furthermore, even this maximum limit of 25% is not guaranteed, as such "e 6 According to the Statute, the court shall take into account any additional costs, loss and damage, including legal fees.
Despite its limitations, TCA 56-7-105 breach of good faith for non-payment provides some relief to policyholders who have been committed by insurance companies. This charter can also meet requirements that can open the door to other extra contractual damages, which I will discuss further in my next blog.
1 Tennessee Bad Faith Claims: Is a Legutory Good Faith Breach Available to policyholders in Tennessee Prop. Ins. Blog (May 25, 2021).
2 Tenn. Code Ann. § 56-8-101 (c)
3 Tennkod Ann. § 56-7-105 (a)