Insurance Companies Commit Bad Faith and Unfair Claims Settlement Practices When They Fail to Pay Claims That Are Not Fairly Debatable.
In Idaho, every insurance policy is a contract, and every contract has an implied covenant of good faith and fair dealing. As such, an insurance police creates a special relationship between the insurance company and its insured. An insured agrees to pay a premium for coverage under an insurance contract called a policy. The insurance company in return agrees as consideration for the payment of the insured’s premium to exercise good faith and fair dealing in the adjusting of any and all claims brought within the policy period under the terms of the policy and to pay those claims for which coverage is provided within a reasonable period of time.
Idaho has adopted the cause of action for bad faith and unfair claims settlement practices. Bad faith and unfair claims settlement practices is typically associated with an insurance company’s failure to pay a claim in a timely and reasonable manner for which coverage is provided under the terms of a policy and for which is claim is not fairly debatable.
An insurance policy is comprised of a (1) a declaration sheet, (2) the policy itself which sets forth the definitions, terms and conditions of the policy along with any exclusions pertaining thereto; (3) any riders; and (4) endorsements thereon.
A declaration sheet constitutes an "at a glance" summary of the various coverages purchased under the terms of the policy and the premium for each item of coverage. The policy itself is typically comprised of a definition section that defines various terms used through the policy. The policy will also set forth the terms and conditions of coverage along with any exclusions pertaining thereto. Riders are typically supplemental benefits to a policy that are purchased by an insured over and above the standard policy. An endorsement is an attachment to a policy that modifies the terms and conditions of the policy and may change the coverage afforded under the terms of the policy. As such, the declaration sheet, policy, riders and endorsements thereon together comprise the "four corners" of the document which comprise the entire contract between the policyholder and the insurance company. The policy creates a special relationship between the insurance company and the policyholder and the insureds under the terms of the contract.
What happens when an insurance company denies a claim or refuses to make payment within a reasonable period of time? Is the claim fairly debatable or not? What does it mean to have a claim that is fairly debatable?
The tort of bad faith is not just a cause of action for breach of contract. It is a separate cause of action in and of itself which involves an intentional wrong that occurs as a result of the insurance carrier’s breach of a duty imposed upon the same in a special relationship established by the contract. In a breach of contract case, the recovery of the damages is limited to the breach of contract itself. For example, if a party agrees to sell a product for a certain price and fails to deliver that product, the remedies available could be restricted to making the aggrieved party whole for having to find another supplier to obtain the product at the higher price plus perhaps reasonable attorney fees and costs. But what if the company goes bust because of the breach?
The tort of bad faith is a separate intentional wrong beyond that of just breach of contract that results from the breach of duty imposed by as a consequence of the special relationship established by the contract between the policyholder and the insurance company.
Thus, where an insurer "intentionally and unreasonably denies or delays payment" on a claim, and in the process harms the claimant, the claimant can pursue the damages arising as a consequence of that denial or delay against the insurance company so long as the claimant is either the policyholder or the insured under the terms of the policy.
If an insurance company has intentionally and unreasonably denied or delayed payment on a claim, you should immediately seek the advice and recommendation of an experienced bad faith/insurance dispute trial attorney. Boise Trial Attorney Alan Morton has over 31 years of experience in advising and representing clients in a large variety of insurance disputes. His telephone number is 208.344.5555 or toll free at 888.716.8021 or online at http://www.mortonlawyers.com/contact.cfm.