The audio portion of the conference may be accessed via the telephone or by using your computer's

speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.

Presenting a live 90-minute webinar with interactive Q&A

Pursuing Insurance Bad Faith Claims

Over Personal Injury Claim Delays,

Denials and Low Ball Offers Considerations and Best Practices for Proving Bad Faith and Maximizing Damages

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, OCTOBER 8, 2015

Scott Glovsky, Founder, Law Offices of Scott Glovsky, Pasadena, Calif.

Brian S. Kabateck, Founding and Managing Partner, Kabateck Brown Kellner, Los Angeles

Tips for Optimal Quality

Sound Quality

If you are listening via your computer speakers, please note that the quality

of your sound will vary depending on the speed and quality of your internet

connection.

If the sound quality is not satisfactory, you may listen via the phone: dial

1-866-869-6667 and enter your PIN when prompted. Otherwise, please

send us a chat or e-mail sound@straffordpub.com immediately so we can

address the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Quality

To maximize your screen, press the F11 key on your keyboard. To exit full screen,

press the F11 key again.

FOR LIVE EVENT ONLY

Continuing Education Credits

In order for us to process your continuing education credit, you must confirm your

participation in this webinar by completing and submitting the Attendance

Affirmation/Evaluation after the webinar.

A link to the Attendance Affirmation/Evaluation will be in the thank you email

that you will receive immediately following the program.

For additional information about continuing education, call us at 1-800-926-7926

ext. 35.

FOR LIVE EVENT ONLY

Program Materials

If you have not printed the conference materials for this program, please

complete the following steps:

• Click on the ^ symbol next to “Conference Materials” in the middle of the left-

hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a

PDF of the slides for today's program.

• Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

FOR LIVE EVENT ONLY

Establishing and Arguing

Bad Faith

6

… IN 90 MINUTES SO BUCKLE UP!

7

8

WHY WE BUY INSURANCE

Key to all damage arguments

9

BAD FAITH – DAMAGES

Why People Get Insurance

“An insured does not seek an insurance contract seeking

profit, but instead seeks security and peace of mind through

protection against calamity. Because security and peace of

mind are the principal benefits for the insured, courts have imposed special obligations, consonant with the special

purposes . . .”

(Love v. Fire Ins. Exch. (1990) 221 Cal.App.3d 1136, 1148.)

10

PIGS GET FAT HOGS GET SLAUGHTERED

11

IDENTIFYING TYPES OF INSURANCE

First Party Coverage

• Involves an insured’s claim against the insurer under coverage written for the insured’s direct benefit

• Examples: Property Insurance

UI/UIM Insurance

Life, Health & Disability

Third Party Coverage

• Provides coverage for liability of the insured to another

• Examples: General Liability

Professional Liability

D&O Liability

12

13

14

3 PRIMARY AREAS OF DAMAGES

Contract Damages

Bad Faith aka Extra-Contractual Damages

Punitive Damages

15

CONTROL CLIENT EXPECTATIONS

16

CONTRACT DAMAGES IN GENERAL

A contract claim limits the insured to contract remedies only, i.e., unpaid policy benefits

Threshold Questions:

1) Was there a breach?

This is the gateway to bad faith and its damages

2) How was there a breach?

i. Insurer denies that coverage is owed

ii. Insurer pays only some of what is owed

iii. Insurer pays but only after delay

17

ESTABLISHING BAD FAITH

18

WHAT IS “BAD FAITH”?

Unreasonable

vs.

Negligence

19

RULES OF THE ROAD

Insurance Special Relationship

• Business of insurance is highly specialized, with members particularly vulnerable and dependent on their insurer

• Must deal fairly and in good faith with its insureds - this is not an adversarial process.

• Must treat its insureds’ interests equal to its own interests

• Must make claims decisions without regard to profit.

20

BAD FAITH – IN GENERAL

• For an award of bad faith damages, the insurer must

have acted in bad faith, i.e., unreasonably or without

proper cause

• The insurer is not a fiduciary but “must give as much

consideration to the welfare of its insured as it gives to

its own interests”

21

GENERAL BAD FAITH DAMAGES

1) Economic Harm

All economic loss that the insured suffered as a result of the insurer’s bad faith conduct

2) Attorneys’ Fees

Attorneys’ fees incurred by an insured to compel payment of benefits due under an insurance policy Brandt v. Superior Court (1985) 37 Cal.3d 813

3) Emotional Distress

Available in first party cases (insured must be a natural person), must demonstrate “Articulable Harm”: the story of what (bad things) happened to the client

22

ESTABLISHING BAD FAITH UNREASONABLE CONDUCT

Admissible evidence to show an insurer acted unreasonably –

no single factor is conclusive but tends to establish “unreasonable” conduct:

• Failure to investigate claim thoroughly

• Failure to evaluate claim objectively

• Using improper standards to deny claim

• Unreasonable delay in payment of claim

• Dilatory claims handling

• Failure to attempt settlement

• Use of abusive tactics

• Violation of the Unfair Insurance Practices Act (Cal. Ins. Code § 790.03)

23

• Must fully, fairly and thoroughly investigate

before a denial

• Fairly and objectively- must diligently look for evidence

to support coverage

• Thoroughly - cannot deny based on insufficient

information.

INVESTIGATION

24

RULES FROM STATS/REGS

• Unfair Claims Settlement Practices • (California Ins. C. § 790.03(h))

• Misrepresenting to claimants pertinent facts or insurance policy provisions

• Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims

• Failing to affirm or deny coverage of claims within a reasonable time

25

• Not attempting in good faith to effectuate

prompt, fair, and equitable settlements of

claims in which liability has become

reasonably clear.

• Failing to provide promptly a reasonable

explanation of the basis relied on in the

insurance policy, in relation to the facts or

applicable law, for the denial of a claim

RULES FROM STATS/REGS

26

(10 Cal. C. Regs. §§ 2695.1-14)

• Insurers must disclose to their insureds or beneficiaries “all benefits, coverage, time limits or other provisions of any insurance policy issued by that insurer that may apply to the claim…”

• Generally must accept or deny claims within 40 days after receipt, unless they advise the claimant in writing of the reasons for delay, and update the reasons every 30 days.

• Every insurer must conduct and “diligently pursue” a “thorough, fair and objective” investigation.

• No demands for immaterial information

• No unreasonably low settlement offers

FAIR CLAIMS SETTLEMENT PRACTICES REGULATIONS

27

WORKING UP THE CASE

• Detailed chronology

• Discovery focused on rules of the road

• Claim file and documents regarding claim • Puzzle

• Attorney-client privilege

• Policies and procedures

• Training documents

• Colonial Life discovery

• Interview witnesses

• Research defendants

• Analyze case from perspective of defense counsel

28

DEPOSITIONS

• The decision-makers (adjusters)

• Who is this person?

• Background, training and experience

• Rules of the road

• Claims handling process

• Detail their investigation – Did you “investigate”

• Why they decided to deny/delay the request

• What documents they read or relied upon before making the decision?

• Who did they talk to?

• How long did they spend on the request?

• How are they compensated? (bonuses, stock options)

• Punitive damage questions

Side note:

Never “set up” insurance companies

for bad faith.

They are capable of it all on their own.

29

30

TRIAL STORY OF THE INSURER

Trial Themes

• Promises and lies - trust and betrayal

• Policyholder bought peace of mind

• Insurance is a different type of business

31

1ST PARTY COVERAGE PROPERTY INSURANCE

Bad Faith Damages

• The insurer wrongfully denies a claim based on a “policy exclusion” or a “non-covered peril”

• The insured’s policy covered water damage but not mold.

The insurer’s bad faith delay or denial of payment for water damage allowed mold to form. The insurer will be liable for the

mold and other losses.

32

1ST PARTY COVERAGE PROPERTY INSURANCE

Bad Faith Damages

• The insurer becomes liable for pecuniary loss that arises from the delay

or denial, even if the loss was not originally covered under the policy

and whether it could have been anticipated or not

• Additional uncovered work to the home

• Living expenses

• Rent for temporary housing

• Mileage for increased traveled from temporary home to work

• Cost of fencing to secure damaged/destroyed house

• Cost of repairing/refurbishing personal items recovered

• Pet boarding cost and increased veterinary bill due to

illness/injury resulting from the loss event

33

1ST PARTY COVERAGE UM/UIM

Facts

• An UM/UIM policyholder makes a claim for which liability of the underinsured motorist is clear and the damages are

clearly in excess of the underinsured motorist’s policy limits,

and the insurer refuses to pay

Facts to Consider

• Binding arbitration

• You will not exceed policy limits in UM/UIM

• The insurer can be liable for all articulable harm, attorneys’

fees, and cost of arbitration

• Damages insured sustained due to delayed payment

34

1ST PARTY COVERAGE ARTICULABLE HARM STANDARD

Use the Articulable Harm Standard

How did the failure to pay UM/UIM benefits hurt

the insured?

35

1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY

Life Insurance

• Insurer contends that the medical condition was

present at the time of application and not

disclosed and then denies benefits of policy

Bad Faith Damages

• Economic Harm

• Burial Expenses

• Foreclosure

36

Health Insurance

• Failing to authorize necessary medical treatment entitled to, claiming that the treatment is not medically necessary

when the insured’s own treating doctors say it is

• The insurer may be liable for exacerbating insured’s health

for failure to provide policy benefits when due, or even

death

Bad Faith Damages

• Cost of health care – not capitated rate

• Worsened condition/death

• What the family had to incur to pay medical expenses

1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY

37

1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY

Disability Insurance

• Insurer contends that the insured’s medical condition

does not prevent him from performing his job

Bad Faith Damages

• Economic Harm

• Loss of home, car, etc.

• Loans

38

1ST PARTY COVERAGE LIFE, HEALTH & DISABILITY

Beware of ERISA

The Employee Retirement Income Security Act (ERISA) preempts

many areas of state law regarding suits for employee benefit

plans, including life, health, and disability insurance.

Insured can only recover amount of benefits wrongfully denied,

plus attorneys’ fees at the court’s discretion.

ERISA exemptions: government and public agency employees,

church employees, employees whose employer only collects funds and does not endorse the program.

39

3RD PARTY COVERAGE

The Duty to Defend

vs.

The Duty to Indemnify

The Duty to Defend is broader than the Duty to Indemnify

40

SCENARIOS & EXAMPLES 3RD PARTY COVERAGE

The Duty to Defend

• Wrongful failure to defend opens the insurance carrier to liability for the whole amount of the judgment, including

any amount in excess of the policy limits

The Duty to Indemnify

• The insurer is liable only for the damages that flow from the failure to indemnify

The Duty to Settle

• Liability insurer has a duty to settle third party claims within

policy limits when liability is reasonably clear

41

PUNITIVE DAMAGES

42

GOAL

• Malice

• Oppression

• Fraud

43

PUNITIVE DAMAGES IN GENERAL

Requires a showing beyond “unreasonable”

• Show clear and convincing evidence of oppression,

fraud, and/or malice

• Constitutional limits on punitive damages (State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 438)

• In California, multiplier by 3 – 4 is the limit, absent extraordinary circumstances

(Century Sur. Co. v. Polisso (2006) 139 Cal.App.4th 922, 966.)

It is an open question whether punitive damages have to bear a reasonably relationship to all compensatory damages or just tort damages.

44 44

BUILDING PUNITIVE DAMAGES

• Reprehensibility - most crucial factor in

evaluating a punitive damages

• Factors

• whether the conduct involved repeated actions or was

an isolated incident

• whether the harm was the result of intentional malice,

trickery, or deceit or simply an accident

45

PUNITIVE DAMAGES

Plaintiff has the obligation

to prove the net worth of Defendant

46

PUNITIVE DAMAGES

"In light of our holding that evidence of a defendant's financial

condition is essential to support an award of punitive damages,

Evidence Code §500 mandates that the plaintiff bear the burden of

proof on the issue. . . .These bedrock concerns—policy and fairness—

support placing the burden on a plaintiff to prove a defendant's

financial condition."

Adams v. Murakami, 54 Cal. 3d 105, 119-20 (1991).

47

PUNITIVE DAMAGES Pull Annual/Quarterly Statements Online

California Code of Regulation § 2308.1

48