Insurance carriers have a legal duty to settle as defined by state law and if they fail to do so, they can be sued for insurance bad faith.
After an accident, victims and their loved ones can file injury claims with their own insurance carriers as well as make demands against those responsible for the incident. It is possible for several different insurance policies to be involved in a serious or fatal accident in Indiana or Illinois.
Of course, these insurance companies are in the business of making a profit by providing insurance in the event of an accident, from an auto accident or a semi-truck crash, to a doctor’s mistake covered by his medical malpractice coverage. Legally, they are to resolve the claims properly and according to both the policy provisions as well as state and federal law.
Insurance Company Acting in Bad Faith
However, it is important for accident victims to know that there are occasions when the insurance companies do not do the right thing. We’ve discussed this before, see:
- Insurance Company Has Duty to Settle Your Claim: Bad Faith Lawsuits Against The Insurer
- The Law of Bad Faith Insurance Claims in Indiana and Illinois.
Unfortunately, in these situations, attorneys advocating for accident victims and their families must not only fight for justice regarding the accident itself, but also against wrongdoing within the insurance company’s actions in dealing with the claim that has resulted from that accident.
States Laws Exist to Fight against Bad Faith Activity by Insurance Companies
Each state has its own set of laws to deal with insurance carriers that fail to do the right thing and act in “bad faith.” Claims (and lawsuits) based upon bad faith can be filed in either Indiana or Illinois, depnding upon where the particular cause of action accrues and what the state law provides.
Illinois
Illinois’ bad faith laws can be found in court precedent establishing the insurer’s duty to settle a claim made against the insured when (a) there is a reasonable probability of recovery in excess of policy limits; and (b) there is a reasonable probability of a finding of liability against the insured. Haddick Ex Rel. Griffith v. Valor Insurance, 763 N.E.2d 299, 198 Ill. 2d 409, 261 Ill. Dec. 329 (2001).
Indiana
Indiana’s bad faith claims arise out of case precedent that explains that an insurer commits bad faith by failing to settle when it had knowledge that there was no legitimate basis for denying liability. Pistalo v. Progressive Cas. Ins. Co., 983 N.E.2d 152, 160 n.5 (Ind. Ct. App. 2012), trans. denied.
Huge Judgments against National Companies
Many may assume that these bad faith cases happen with small carriers, or fly-by-night operators that are trying to lowball or fight paying claims for budgetary reasons. This may occur, of course. However, the big fight regarding “bad faith” insurance claims often involves well-known, national insurance carriers whose names are easily recognized.
Consider the recent example of a national company (GEICO) found to have committed “bad faith” in an affirmed, formal courtroom judgment. Far from a small carrier, in 2019, GEICO (Government Employees Insurance Company) ranked as the second largest auto insurance company in this country.
GEICO Case as Example of Car Crash Claim Insurance Bad Faith
On May 17, 2019, a California appeals court affirmed a lower court’s judgment awarding $1,000,000.00 in punitive damages based upon a bad faith insurance case brought by Michael Mazik, who was injured in a car crash where the other driver was found to be at fault. Mr. Mazik had a policy with GEICO.
Read the full opinion here: Mazik v. Geico General Insurance Company, No. B281372 (Cal. Ct. App. May 17, 2019).
What are Punitive Damages?
Sometimes called “punishment damages,” punitive damages are awarded without consideration of the victim’s injuries (his medical expenses, for instance, or his pain and suffering). They focus solely on the defendant, and exist to discourage or punish bad actions, where hitting the pocketbook of the defendant is hoped to be a method of preventing the same type of bad act in the future.
In California, punitive damages can be awarded only if the victim can prove by “clear and convincing evidence” that the defendant “has been guilty of oppression, fraud, or malice.” Mazik, citing California statute § 3294, subd. (a).
Punitive damages are also available under Illinois and Indiana law, in the proper situation.
Mazik’s Auto Accident Claims
In Mr. Mazik’s case, he was seriously injured in a car crash on a California highway where he was hit head-on while both vehicles were traveling at around 50 mph. The other driver, who had swerved into Mr. Mazik’s lane, was killed in the accident.
When the time came to deal with his legal matters, Mr. Mazik first filed his demand against the other driver’s policy. Mr. Mazik received $50,000 from the other driver’s insurance carrier, Mercury Insurance, which was the full amount of that coverage.
Next, Mr. Mazik filed a claim with his own carrier, GEICO, for underinsured motorist benefits. His policy provided $100,000 in coverage under its provisions. Along with his claim, Mr. Mazik sent his supporting documentation. Things like his medical records, doctor’s prognosis, and confirmation of the Mercury payment, etc., were submitted.
Mr. Mazik asked GEICO to pay $50,000, which he explained would be the full policy amount less the payment he had already received from Mercury.
Adjusters’ Actions; Arbitration Award
At GEICO, an insurance claims adjuster reviewed their policyholder’s submission. After checking with the regional liability administrator, this adjuster rejected Mr. Mazik’s claim for $50,000.00. Instead, GEICO offered him a settlement of $1000.00.
Next, a second GEICO claims adjuster took over the file. Without any new information, this adjuster now offered to settle the claim with Mr. Mazik for $13,800.00. A few months later, GEICO offered to settle for $18,000.00. Then the company sent its statutory offer to compromise the dispute with Mr. Mazik for the amount of $18,887.00.
The settlement offers received by Mazik were: $1000; $13,800; $18,000; and $18,887.00. Mr. Mazik’s response? He nixed all these offers to settle. Once again, he asserted his right to his policy limits.
The case went to arbitration. Michael Mazik was awarded the full $50,000 he had requested. That concluded the claims regarding Mr. Mazik’s car crash. Now, Mr. Mazik moved forward with his claim for insurance bad faith.
Bad Faith Lawsuit against GEICO
In May 2014, Michael Mazik filed his lawsuit against GEICO asserting bad faith. He won at both trial and on appeal.
Jury Trial
In the July 2016 jury trial, the jury awarded Mr. Mazik compensatory damages of $313,508, described as $300,000 for “[m]ental suffering, anxiety, and emotional distress” and another $13,508 for “attorney’s fees and costs to recover the insured policy benefits.”
The jury also awarded punitive damages of $4,000,000.00. However, upon GEICO’s motion, the trial judge lowered this amount to $1,000,000.00 after finding the jury’s determination was (1) ”excessive in light of the ratio of punitive to compensatory damages,” and (2) the fact that Mr. Mazik’s claim related to financial damages rather than personal injury.
Appellate Review
In the May 2019 decision, the California appellate court approved the lower court decision. It explained that GEICO had ignored or disregarded documentation that established Mr. Mazik had suffered a permanent, painful injury in the crash.
There is evidence that GEICO intentionally manipulated the facts to create a favorable record justifying its offers to Mazik below policy limits. As mentioned, the trial court found that GEICO “`cherry picked’ medical information and disregarded unfavorable findings.” While we review the amount of punitive damages under the de novo standard, “findings of historical fact made in the trial court are still entitled to the ordinary measure of appellate deference.” (Simon, supra, 35 Cal.4th at p. 1172.)
The trial court’s assessment is supported by the evidence. Grothen acknowledged that Dr. Tauber’s report prior to the arbitration suggested that Mazik was “going to have ongoing problems.” For strategic reasons, GEICO did not provide that report to its own expert, Dr. Williams, on whom GEICO relied for its claim valuation. While this strategic manipulation is perhaps less egregious than outright fraud, it nevertheless indicates intentional conduct rather than “mere accident.” (Cf. Nickerson v. Stonebridge Life Ins. Co. (2016) 5 Cal.App.5th 1, 22 [“Stonebridge’s practice was never to authorize peer reviewers to communicate with treating physicians, thus intentionally concealing material information from the claims’ functional decision maker so as to limit the amount Stonebridge would have to pay out on its policies”].)
Bad Faith Claims by Accident Victims in Indiana and Illinois
For accident victims and their families, the road to justice may be a very long one when their claims against those who are responsible for their injuries are but the first battlefield they must face. If there are bad acts or bad faith by an insurance company, the victim must face a second fight against that carrier that is independent of the accident case.
Both Indiana and Illinois law provides victims with the ability to fight against bad faith on the part of insurance companies who fail in their duty to settle insurance claims presented to them. No carrier, no matter how much of the market share it controls, is immune to these horrendous displays of putting profits over people – and the resulting lawsuit that may follow.
If you or a loved one suspect that an insurance carrier has acted in bad faith, then it is important to investigate that possibility and to do so within the legal time frame for filing a bad faith action against that company. Please be careful out there!
