In addition to the duties of insurance companies to process and pay covered claims submitted by their insureds, carriers also have duties to their policyholders regarding third parties who bring claims against their insureds. An example would be an automobile accident, where the insured is sued by the other driver for causing the accident. Insurers who act unreasonably regarding these third-party claims may be found liable for acting in bad faith and may be required to compensate the policyholder for the damages their conduct has caused.
When a claim is lodged against a policyholder and reported to the insurer, the insurance company generally makes a preliminary determination whether coverage exists in the given situation. This process most often involves investigating the claim, and failing to conduct an adequate investigation may be an instance of bad faith. Absent a good faith coverage dispute, the insurance company should then decide whether to settle with the third party or defend the action in court. The duty to pay (indemnify) and the duty to defend are likely both present in the average liability insurance policy.
The duty to pay a third party claim may involve either settling pre-trial or paying a judgment if the case is taken to trial, but the policyholder loses. In settlement talks, the insurer can be in bad faith for making unreasonable settlement offers or refusing to accept reasonable settlement demands. While the decision whether to accept an offer or go trial is a strategic one, an insurer which refuses a reasonable offer within policy limits may wind up liable to the policyholder for a judgment that exceeds the policy limits, if the policyholder later loses at trial. This type of extra-contractual liability was recently ordered by the Supreme Court of Kings County in a New York City automobile accident case.
Seek Independent Legal Representation
Just because you are dealing with your own insurance company against a third party, do not assume that your insurer has your best interests at heart. As always, the carrier is looking after its own bottom line, and that attitude may not help you resolve a legal matter in the quickest or most favorable manner for you. You should always seek the advice of an experienced personal injury attorney who can help you determine whether your insurance company is doing its job or not. In New York City, contact the law office of Leandros A. Vrionedes, P.C.
