INSURANCE BAD FAITH/INSURANCE DENIALS
When an insurance company wrongfully denies or underpays a claim, that is a “breach of contract.” When an insured prevails on a breach of contract claim the insured is entitled to the “benefit of the bargain” with the insurance company. That means the insured is entitled to contract damages (that is to have the claim fully paid per the terms of the insurance contract).
Contract damages are limited by the expectation of the parties at the time they entered the contract. In an insurance case, that usually means the insured is just entitled to have the claim paid as it should have been paid originally.
Additionally, if the insured gets a verdict enforcing the insurance policy, the insured is also entitled, under Oklahoma law (36 O.S. § 3629), to an award of costs, attorneys’ fee, and interest at 15% from the date the claim should have been paid.
But sometimes the insurer is not only wrong about the basis for denying or undervaluing the insured claim, but it also lacks any reasonable basis for the way it handled the claim. That is called “insurance bad faith.” McCorkle v. Great Atl. Ins. Co., 1981 OK 128, ¶ 21, 637 P.2d 583, 587 (“the essence of the . . . tort of bad faith with regard to the insurance industry is the insurer’s unreasonable, bad-faith conduct, including the unjustified withholding of payment due under a policy”).
Insurance bad faith is a “tort,” which just means a “civil wrong” other than breach of contract. As shown below, whether a claim denial is just a breach of contract or also the tort of insurance bad faith, makes a huge difference in the damages available to the insured.
When the insurer denies a claim in bad faith, the insured is not only entitled to the benefit of the bargain (or “contract damages”) but the insured may also recover “extracontractual damages,” such as emotional distress and financial or economic harm. Goodwin v. Old Republic Ins. Co., 1992 OK 34, ¶ 13, 828 P.2d 431, 435. This opens the door to recover damages due to anxiety caused by the claim denial or even physical ailment cause by the insurer’s bad faith conduct. A bad faith plaintiff may also recover monetary damages for things like damage to credit, lost economic opportunity, or even a forced bankruptcy.
Unlike contract damages, there is no theoretical limit to tort damages. You are entitled to any damages you suffered that can be reasonably traced to the insurer’s bad faith conduct.
Finally, where the insurance company acts in reckless disregard for the insured’s rights or acts intentionally and with malice, the insured can also recover punitive damages ( or “exemplary damages”). 23 O.S. § 9.1.
Nearly any kind of insurance claim can result in a bad faith action. We handle many property insurance claims such as wind and hailstorm damage, roof damage, broken pipes and other water damage claims as well as fire loss. But we also handle bad faith claims involving uninsured motorists coverage (UM or UIM), health insurance or life insurance claim denials, or business claim denials under a business’ commercial general liability policy.
Give us a call today to discuss your insurance claim. We have many years’ experience with insurance and insurance bad faith claims, having handled many hundreds of these claims for our firm (and Paul’s former firm). Paul also does freelance legal writing and consulting for some of Oklahoma’s finest insurance bad faith attorneys. If we can’t help you with your bad faith case, we can likely place you with another experienced Oklahoma bad faith lawyer.