Insurance Bad Faith: Let the Jury Decide
Read our blog posts on bad faith law here
At the Chaney Law Firm, we've handled dozens of bad faith claims against insurance companies. Under Arkansas law, bad faith happens when an insurance company commits any of the following acts:
- fails to give its insured the benefit of the doubt
- fails to give its insured's interests at least equal consideration as its own interests
- fails settle a case when it's the reasonable thing to do
- ignores facts in its own files that it should pay a claim
- acts in a dishonest or oppressive manner
- acts with hatred, ill will, or a spirit of revenge
An insurance company owes a fiduciary duty to its insureds. That means an insurance company must do the things an insured (someone who has or is covered by an insurance policy) would do in his or her own best interests. Unfortunately, that doesn't always happen.
Insurance companies have a duty under Arkansas law to promptly pay claims that they reasonably owe. Despite this duty, there is evidence that over the past two decades insurers have increasingly used the claims process as a profit center by delaying payment or denying claims outright:
Beyond theory, although the insurance industry obviously disputes the charge, there is substantial evidence that since the early 1990s, insurance companies have increasingly viewed the claims process not as the site for keeping their promise of security but as a profit center. Through systematic reorganization of the claims process, incentives to employees and managers, and more aggressive approaches to litigation, the companies have embarked on a strategy that increases profits at the expense of claimants. This development has taken place across property, casualty, and disability insurances as a whole.
[Jay M. Feinman, The Insurance Relationship as Relational Contract and the “Fairly Debatable” Rule for First-Party Bad Faith, 46 San Diego L. Rev. 553, 566-67 (2009)].
Arkansas law defines insurance company bad faith as "conduct that is dishonest, oppressive, or malicious." Despite this seemingly simple definition that would place the question of bad faith in the hands of juries, in the 1980's our courts added many limitaitons on when insurance companies could be held accountable for bad faith conduct.
So, while our courts recognize that insurance companies have the means to delay and deny payment of just claims, the law makes it difficult for injury victims to hold insurance companies accountable. That is, juries don't often get to decide what is and is not bad faith.
It is no coincidence that since these less strict bad faith rules were put in place, insurance companies' conduct has grown increasingly worse. We believe that juries, not judges, should be the deciders of what is and is not dishonest conduct.