When an insurance company denies a claim without adequate investigation of the facts or denies a claim without a justifiable reason, the company is liable for bad faith. The person who’s claim was denied can recover compensatory and punitive damages in a bad faith action. The compensatory damages are usually the amount that should have been paid on the claim, with interest. The punitive damages are in an amount within the jury’s discretion and are awarded to punish the defendant and to deter such conduct in the future.

During a recession such as we are in now, some insurance company profits may be lower because the company may not be getting as great a return on the premiums it invests in things such as shopping centers and other businesses. This situation gives insurance companies an incentive to deny claims they should have paid, or to unduly delay paying claims. At least one consumer organization suggests that this is causing an increase in insurance bad faith.

Our firm sees more bad faith cases involving life insurance and disability insurance than any other types. An example is the failure of a disability insurance company to pay a claim when two of the plaintiff’s treating physicians reported that she was totally disabled. The insurance company denied the claim on the basis of sending the plaintiff’s medical records to a physician they regularly hire to look at records and state that the claimant is not totally disabled. The doctor they hired had never seen or treated the plaintiff.

An example of bad faith with regard to a life insurance claim we handled involved the denial of death benefits to a widow on her husband’s life insurance policy. The company claimed the policy was not in effect at the time of her husband’s death, although they paid the premiums up to the time of his death and even after, and all of the premiums were accepted either by the insurance company or its agent.

People pay their hard earned money to insurance companies so that when they suffer a loss within the policy they can get paid. Unfortunately, some insurance companies and adjusters just don’t want to honor their commitments. Thankfully we have trial by jury and citizens who will force them to honor those commitments.

Lloyd Gathings

I know a lot of people have already left for the holiday — downtown Birmingham is very, very quiet for a weekday. Our office is winding down and I am about to leave for the lake and what should be a great holiday with family and friends.

Unfortunately, our oldest daughter, Honora, will not be able to come for the 4th. She is a news reporter for ABC 33/40 and the news business is 24/7, 365 days a year. Tune in and watch her on the 10:00 news tonight and the afternoon news all weekend. While I will miss her on the 4th, her mother and I are both proud of her reporting for 33/40. She not only works with a lot of really talented news people there, those folks over there are also really good people. So Honora, while I can’t give you a shout out on TV like you did to me on Father’s Day, have a great 4th and I’ll bring you some barbecue from the pit.

Our youngest daughter, Margot, will be at the lake with us. I think I will get her to teach me how to do 360’s and flips on the wake board. On the other hand, she probably would refuse to teach me. She’s in her fourth year of medical school and every time she does a clinical rotation in a specialty, she seems to come up with more restrictions on my diet or my activities. (The only rotation she’s done that I escaped a lecture was probably ob/gyn. It’s just kind of hard to apply that one to me.) Obviously, we are also very proud of Margot, so forgive me for doting here on both girls.

Time to go. Have a very safe and happy 4th of July!

Lloyd Gathings