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How Courts Deal With Defenses to the Tort of Bad Faith 

https://zalma.com/blog

When the Court found that an insureds claim was debatable, the bad-faith  claim must fail. Bad-faith claims were insufficient as a matter of law  where the status of Kentucky law on the issue was "fairly debatable."  [Willowbrook Invs., LLC v. Md. Cas. Co., 325 F.Supp.3d 813 (W.D. Ky.  2018)  The Tort of Bad Faith Has Served its Purpose  

The tort of bad faith, and the punitive damages that seem to go with it,  have, in my opinion, served their purpose. Insurers now have  professional claims departments. Insureds are almost universally treated  with courtesy and respect. More than 90% of all claims are resolved  without litigation or argument. Legitimate claims are paid with  alacrity.  Insurance fraud continues to grow. The amount of money taken from  insurers every year are in the tens or hundreds of billions of dollars.  

The fear of punitive damages has made the fight against fraud difficult  and almost impossible. Even when an insured is arrested, tried and  convicted of the crime of insurance fraud, or attempted insurance fraud.  Attempts will still be made to sue the insurer for the tort of bad  faith.  Before I retired from the practice of law, I contended daily with  insurers who wanted to fight fraud but who found they must decide to pay  a claim rather than face the exposure of a punitive damage judgment.  Sometimes, the settlement of bad faith lawsuits, where there has been no  bad faith and an appropriate denial of a claim or refusal to pay a  policy limits demand, the insurer concludes it must pay more to avoid a  potential run-away jury.  However, practical insurance professionals have a need to resolve  litigation as inexpensively as possible to protect the shareholders who  want the insurer to make a profit. 

As a result, the insurer will disobey  the millions for defense covenant and will make a business decision to  pay the non-covered loss or the fraud, rather than take a chance on an  adverse verdict.  As with all things in insurance, the attitudes of insurers move in  cycles. More often than not, I am now called upon to testify as an  expert in bad faith cases that the insurer insists on taking to trial by  jury rather than pay off a scofflaw.