Today a federal jury in Louisiana awarded a family whose home suffered damage as a result of Hurricane Katrina, a judgment against Allstate Insurance Company for the sum of $2.8 million in damages and penalties. The case involved allegations by Allstate that Hurricane Katrina’s winds did not exceed 100 miles per hour and as a result could not possibly have caused structural damage to a home belonging to Robert Weiss. Allstate also argued that flooding caused damage to the Weiss’s home which of course was a type of damage excluded from the policy of insurance in effect at the time of Hurricane Katrina. Allstate also argued that Weiss lied about various aspects of his claim as well and that it should not be held accountable for his property damages. Weiss filed suit against his property insurance company alleging bad faith in the analysis, evaluation and processing of his property damage claims.
The jury evaluated the evidence and concluded that Allstate acted improperly by minimizing damages and suggesting that a policy exclusion applied to the Weiss’s claim. Have you ever made a decision to buy property, auto, health or disability insurance thinking that you too will be protected in times of calamity or loss? If you ever needed to make a claim with your insurance carrier, were you satisfied with the results? Have you ever made a claim for insurance policy benefits only to be denied by your carrier for reasons which you believe are illusory? In Arizona, every insurance contract contains an implied obligation to act in good faith and deal with you fairly. In general if the insurance policy is organized under Arizona law and the insurance company breaches its obligation of good faith and fair dealing, you have the right to sue the carrier alleging bad faith. Insurance companies who systematically place profits ahead of contractual obligations to insureds, face exposure to actual, general and punitive damages. While carriers can certainly decide what risks to insure and can appropriately demand proof of a loss, a carrier cannot use the claims and underwriting process as a pretext to deny costly claims or rescind policies to minimize losses. In my opinion, most insurance carriers treat policy-holders fairly. However, a few bad carriers in Arizona and in other states seek to make as much money as possible without having to payout any claims. How have your experiences been with your own insurance carrier? Do you have a story to share about an insurance carrier that treated you poorly? Have you had good experiences with a particular carrier? Do you believe that an insurance company should be held accountable to a policyholder who suffers a loss as a result of a carrier which breaches its obligation of good faith? I’d like to hear your thoughts about whether Arizona should expand or limit rights to sue insurance companies which wrongfully deny claims or rescind policies. If you need more information about the obligations of an insurance carrier in Arizona, take a look at the Arizona Department of Insurance web site. This site contains consumer complaint forms and other useful information and resources to assist you in understanding when you may consider filing suit alleging bad faith against your insurance company. You may also want to check the National Association of Insurance Commissioners (NAIC) web site containing financial details and other information about carriers throughout the country licensed to sell insurance. The NAIC also provides helpful resources for anybody considering whether to sue an insurance company for bad faith concerning the sale of insurance or in the claims evaluation process.