Recently, CNN.com posted an article about a referendum in Washington that would allow a bad faith cause of action against insurance companies that fail to pay a legitimate claim, allowing for treble damages:
Across the country, insurance companies, trial lawyers and legislators are closely watching a November referendum in the state of Washington that could change how insurers are required to treat their customers.Insurance giants like Allstate, State Farm, Safeco and Farmers have poured more than $8 million into the referendum battle. Their goal is to convince voters to reject a law passed earlier this year that could force insurers to pay up to triple damages and lawyer fees if they fail to pay a legitimate claim and then lose in court. A “yes” vote on the referendum allows the law to go into effect while a “no” vote strikes the law down.
Washington state resident Michelle Tribble plans to vote for the law because she says she has experienced the strategy first-hand. She says her two accidents convinced her insurance companies don’t want to play fair.
Tribble was working for an insurance company when she got rear-ended on the freeway. Ten weeks later she got hit again, this time by an uninsured motorist. The two accidents, she said, resulted in back injuries that required medical treatment. The first company agreed to pay but her own insurer, Allstate, refused to pay even though she had coverage.
“I just wanted my medical bills paid because I didn’t want my credit being hurt,” Tribble said, adding that the total came to about $18,000.
She said Allstate dug into her medical past.
“They brought out stacks of medical records, you know, to see if I was at all deceptive.”
An arbitrator sided with Tribble, but Allstate refused to pay. The case went to court, where a jury, too, ruled for Tribble. But Allstate appealed again. Finally, four years after the accident, the company paid her claim.
Allstate said it could not comment on individual claims but said cases like Tribble’s prove “that the current judicial system is working.”
The question I present is: How would this work in the New York no-fault arena, if it would
work at all?
How would the Courts and /or Legislature define a “failure to pay a legitimate claim?” If an insurance lost a case on medical necessity, would that make their denial unreasonable?
If they lost a trial on a technicality, would that be unreasonable? What if they submitted a late
denial?
Even if it was a workable cause of action, would it be worth it to pursue it on a $500.00 case?
Most people can agree that insurance companies shouldnt unreasonably deny claims and that
the best deterrant against it is monetary. Surely, Ms. Tribble’s ordeal wasn’t a case of the “judicial system working.”(1)
While increased vigilance is a perfectly understandable reason for increased diligence in handling claims, shouldn’t there be a check on overzealous insurance companies? On the other hand, is all of this appropriate for no-fault.
Thanks to David Barshay, Esq. for bringing the article to my attention.
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(1) For the sake of argument, I’m assuming her story is accurate. If that doesn’t suit you, imagine a hypothetical person in the same position.
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