Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
June 08, 2022
Explaining Reasonable Conduct of Insurer

How Courts Deal With Defenses to the Tort of Bad Faith

Read the full article at https://lnkd.in/gwFdWEZj and see the full video at https://lnkd.in/g6ZvyJ6U and at https://lnkd.in/gHd4NzA7 and at https://zalma.com/blog plus more than 4250 posts.

Posted on June 8, 2022 by Barry Zalma

I will not be posting for a week after this but you have available more than 4250 posts and more than 400 videos at rumble.com/zalma.

See the full video at https://rumble.com/v17nfbd-explaining-reasonable-conduct-of-insurer.html and at

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 courts, legislatures and the insurance departments of the various states must recognize that an insurer with the best of all possible fraud investigation units will, on occasion, err. A company with a highly trained and motivated fraud investigation unit made up of professional investigators and attorneys who are human, will err on occasion.

The public, and those who serve on juries, must understand that an aggressive fraud investigation, even if it reaches an incorrect result, is not malicious and if negligent, not an act of bad faith.

Today, if a jury believes the insurer was wrong in its decision, it must award punitive damages, regardless of the instructions read to it by the judge about the elements of the tort. Because of the bad publicity created by the policyholders’ bar and the press reports of massive bad faith judgments, insurers are not liked by a majority of the people who serve on juries. The prudent defense lawyer will assume that at least three of the jurors will voted for the policyholder, regardless of the evidence presented, and defense counsel must win over the remaining nine.

The bad publicity that was given to insurers by the early bad faith cases has poisoned the public image of insurers. The plaintiff insured only needs to convince six of the jurors who may sit in judgment without anti-insurer prejudice to receive a majority verdict with 9 votes.

As a business necessity, insurers must have the confidence of the public that they are financially sound, secure and have an overabundance of funds available to pay claims. The need to show the security of the company to the public has the effect of convincing juries that a multimillion-dollar verdict against the insurer will not hurt it. Plaintiffs’ lawyers disingenuously tell juries that they don’t want to harm the insurance company, all they want to do is get its attention. They argue that a $10 million verdict might cause an itch in the corporate pocketbook sufficient to cause management to scratch away the need to improperly reject claims. The argument is hard for a jury of working people to withstand.
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.

I can, as my mentors taught me 53 years ago, state with confidence the opinion that an insurer should spend millions of dollars for the defense of a non-covered or fraudulent claim and not a dime for tribute to an insured who brings a spurious bad faith law suit.

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.

I can only hope that this cycle continues and more attempts at fraud are defeated.
The Fourteenth Amendment to the U.S. Constitution

No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

If the law allows an insured to sue for tort damages as a result of a breach of the covenant of good faith and fair dealing equal protection should allow an insurer to sue the insured for tort damages as a result of the breach of the same covenant. Some litigants cannot, under our system of constitutional law, be more equal than others. Yet, until a court agrees, insureds are more equal than their insurer.

Although the courts may think so, the insured’s breach of the covenant of good faith and fair dealing is also separately actionable as a contract claim and that some forms of misconduct by an insured will void coverage under the insurance policy. (Imperial Cas. & Indem. Co. v. Sogomonian (1988) 198 Cal.App.3d 169, 182.

To paraphrase what George Orwell opined in his novel Animal Farm some litigants are more equal than other litigants. Since both the insured and the insurer freely entered into the contract of insurance it would appear only fair if one is allowed to obtain tort damages for breach of the covenant of good faith and fair dealing the other should also have the same opportunity.

While Connecticut, like California, recognizes that every insurance policy carries “an implied duty requiring that neither party do anything that will injure the right of the other to receive the benefits of the agreement,” [De La Concha of Hartford, Inc. v. Aetna Life Ins. Co., 269 Conn. 424, 432–33, 849 A.2d 382 (2004)] no Connecticut court has recognized a tort of “reverse bad faith” against insureds, nor are Connecticut courts likely to do so in light of established precedent. It follows that because an insured’s breach of the covenant is not actionable in tort, an insurer cannot lessen responsibility for its own tortious conduct by putting forth an affirmative defense of bad faith. [Hartford Roman Catholic Diocesan, Corp. v. Interstate Fire & Cas. Co., 199 F.Supp.3d 559 (D. Conn. 2016)]

An insurer can commit the tort and is obliged to pay tort and punitive damages. An insured, who is totally evil, whose only interest in the insurance agreement is to defraud the insurer, who refuses to cooperate with the insurers investigation, who does everything possible to harm the insurer, cannot commit the tort.

The abuse of the tort of bad faith has become so extreme that the tort must, in my opinion, be eliminated. Since the weight of authority is that no matter how reasonable are the arguments to do away with the tort of bad faith, the tort must be applied fairly and equally to both insureds and insurers and if that is impossible the tort of bad faith is contrary to the requirements of the Fourteenth Amendment to the U.S. Constitution and its requirement for equal protection.

An insurer who is wronged by its insured should have the same right to tort damages and punitive damages for breach of the covenant as can the insured. No litigant should ever be more equal than another.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
20 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals