What Does It Mean When An Insurance Company Is Acting In Bad Faith?

by Friedman & Ranzenhofer, PC on December 21, 2011

in NY Insurance Issues

Most Buffalo personal injury lawsuits involve a defendant whose damages are – at least to some extent – covered by insurance.  Motor vehicle, homeowners and other types of insurance often provide the defense, including hiring attorneys, in personal injury litigation.  When doing so, an insurance company is legally required to protect not just its own interests, but also the interests of its insured.  When it fails to do so, it may be accused of acting in “bad faith.”

There are several acts that may lead to an accusation that an insurance company is acting in bad faith, but in personal injury lawsuits, this issue usually arises when a jury returns a verdict in excess of the policy held by the insured.  While an insurance company is not required to settle every lawsuit if it has a legitimate reason to believe it has a meritorious defense or the value of the injury is well below the policy limits, it is required to take reasonable steps to protect the assets of the insured. 

As an example, an insurance company has an opportunity to settle a personal injury lawsuit within the policy limits.  The injury is likely to be worth more than the policy limits and the insurance company’s client is clearly at fault.  The insurance company decides not to settle the lawsuit.  The matter is then taken to trial and the jury renders a verdict far above the policy limits.  Under this scenario, the insurance company may be found to have acted in bad faith and subject to civil litigation to recover the additional amount the defendant is required to pay.

{ 0 comments… add one now }

Leave a Comment