Federal Appeals Court Rules that Insurance Company May Have Acted in Bad Faith

The United States Tenth Circuit Court of Appeals recently published an opinion that reversed a lower court’s ruling in favor of the defendant, concerning the plaintiff’s claim that the insurer wrongfully delayed the payment of benefits for her personal injury claim. The appeals court’s reversal of the lower court’s granting of summary judgment to the defendant on this claim will result in the case going back down and proceeding toward a trial if the parties are unable to settle before that time.The plaintiff in the case of Peden v. State Farm had been seriously injured while riding in a car that was involved in a DUI accident, and she allegedly suffered damages in excess of the policy limits of the insurance held by the driver of the vehicle involved in the crash. Before filing suit, the plaintiff made a claim with the defendant, seeking compensation for her injuries, and she was paid the maximum amount under the driver’s bodily injury liability policy limit. She sought the balance of her damages through her own policy’s uninsured/underinsured motorist coverage, but her claim was denied.

The Plaintiff Files a Lawsuit to Enforce Underinsured Motorist Claim and Alleges Bad Faith by the Defendant

After her claim for underinsured motorist protection coverage was denied, the woman filed a personal injury lawsuit against the defendant in federal court to enforce the full benefits of the coverage. In addition to her claim for compensation related to the damages she suffered, she sought additional damages, as permitted under Colorado law, since the defendant denied her initial claim without good reason or even a proper investigation, forcing her to bring a claim that should not have been necessary. After the lawsuit was filed, the defendant paid out the full amount of coverage.

District Court Ruled the Insurance Company Acted Reasonably as a Matter of Law

The district court entered a ruling that disposed of the plaintiff’s claim that the insurer acted in bad faith without submitting the question to the jury. The court found that the plaintiff was eventually paid out the full benefits of the policy, and any delay was reasonable under the circumstances as a matter of law. On appeal, the Tenth Circuit disagreed with the district court, finding that the defendant may not have performed a sufficient investigation of the plaintiff’s claim before reducing it, and she was only paid in full after a lawsuit was filed. The Tenth Circuit ruled that a jury should have been permitted to evaluate the plaintiff’s claim that the defendant acted in bad faith, so the judgment favoring the defendant was entered in error.

Insurance Companies Cannot Be Trusted to Fairly Address Claims

The crux of the plaintiff’s case in Peden v. State Farm was that the defendant had not even investigated the accident fully or interviewed all of the relevant parties before applying a reduction to the plaintiff’s claim because she allegedly assumed the risk of being injured in the accident. The plaintiff successfully argued to the appellate court that the defendant appeared to reduce the claim without an adequate reason, and had she not brought the case and the subsequent appeal, she may never have been paid the damages to which she was entitled.

Unfortunately, this is a common pattern, especially for accident victims who represent themselves in a case. It is less expensive for insurance companies to deny and reduce claims with insufficient reasons and then pay them if challenged in court than it would be for them to perform full investigations and only challenge the claims that rightfully should be denied or reduced. In an effort to combat this practice that harms consumers and victims, many states (including Colorado and Florida) have passed laws allowing plaintiffs to collect additional damages unrelated to their injury if they can prove that an insurer acted in bad faith in delaying or denying their claim. With these laws in place, insurance companies are encouraged to act in good faith when handling all claims, although the laws are not always effective, and bad faith claims are regularly necessary to hold an insurance company to their word.

Are You a Victim of an Insurance Company Acting in Bad Faith?

If you or a loved one has been injured and has had your claim for damages unreasonably delayed or denied by an insurance company, you may be able to enforce the insurance policy and seek additional damages for the insurer’s bad faith. The Miami accident attorneys at Friedman, Rodman & Frank are experienced in holding insurance companies to their word, and we can help you fight back against them if you have had a claim wrongfully denied. Our skilled South Florida bad faith insurance attorneys can help present a convincing case for damages. Contact us to schedule a consultation to discuss your case. The consultation is free, and there is no obligation to pursue your case if you choose not to do so. Call today at 877-448-8585 or contact us online to schedule a no-obligation consultation.

More Blog Posts:

Dismissal of Rollerblading Injury Case Affirmed by Appellate Court, South Florida Personal Injury Lawyers Blog, published December 1, 2016.

Court Sides with Plaintiff, Reversing Judgment for Defendant in Slip-and-Fall Case, South Florida Personal Injury Lawyers Blog, published November 17, 2016.

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