Every so often, insurance companies are exposed for engaging in bad faith litigation. A “bad faith insurance claim” is typically seen as an insurer attempting to renege on their obligations to their clients by refusing to pay, or attempting to find an excuse not to play.
This is not an attempt to embarrass or disparage insurance companies. The truth is that many people know very little about bad faith litigation, which means that when it takes place during their negotiation and/or trial, they don’t know how to handle it. We’re merely trying to help the everyday citizen learn more about this topic and understand the rights they have when insurance companies don’t fight fair.
Campbell v. State Farm Mutual Automobile Insurance
In 199, Mr. Campbell was involved in a serious car collision. After the trial was completed, he was found to be guilty of causing a fatality that arose as a direct result of the automobile accident. At this time, the plaintiffs offered to settle with Mr. Campbell for $50,000, which was his auto insurance policy limit. However, State Farm chose not to settle, even though their in-house claims adjuster determined that Campbell (their insured client) was directly at fault. State Farm chose to ignore the adjuster’s input and took the case to court, in an attempt to convince Mr. Campbell that he was only partially at fault for the car accident and the ensuing fatality.
Why is This Bad Faith Litigation?
This case took a shocking turn when the key witness for Mr. Campbell was revealed to be none other than State Farm’s insurance claims adjuster, Raymond Summers. Mr. Summers was the adjuster who initially handled the accident claim and determined Campbell to be at fault, but during his testimony, he explained to the jury that his superiors rejected his input because they wanted to “defend the company”.
Under oath, Raymond Summers admitted to intentionally deceiving over 100 State Farm policyholders during previous cases. Summers explained to the court that he was instructed to alter his reports and hide evidence from countless policyholders (including Mr. Campbell), and he also revealed that this behavior has been prevalent throughout his 19-year tenure with the company. Examples of their dishonest behavior include cheating policyholders out of their benefits, misleading policyholders about their benefits, and convincing policyholders they were at fault when they were not.
As the case continues, more and more bad faith actions were discovered. State Farm fought against every reasonable request made by the other parties. They did not release any documents unless they were forced to via court order. Upon every request, State Farm attempted to claim attorney/client privilege, but the judge in this case overruled this nearly every single time. In addition to this, State Farm superiors also made a conscious effort to destroy any relevant documents. Because of this, the plaintiff’s legal team has to obtain documents from a variety of other sources, including former employees of the company.
An additional key part of Raymond Summers’ testimony included t. State Farm’s “excess liability handbook” showed that Summers’s behavior was a part of a larger scheme. The handbook also urges company employees to wrongfully “pad” case files. For example, if a prosecuting attorney writes a letter that unfavorably describes the insurance company’s position, the insurance claims adjuster is trained to fill the file with response letters to the attorney, stating that they are misunderstanding or misinterpreting the facts of the case. All of this is done in an attempt to help the insurance company hide, destroy, or diminish information that reflects poorly on them.
Upon hearing these developments, State Farm claimed to be “shocked” at the behavior of Raymond Summers. They claimed they had no idea he falsified medical records, case files, and insurance claims of over one hundred people. However, the prosecuting attorney was able to obtain a court file clearly showing that State Farm was “in the know” the whole time. The company used the falsified documents to enforce the release of a policyholder’s claim.
As the case continued, State Farm’s poor behavior continued to come to light. It was revealed that the “Performance, Planning and Review” handbook distributed to insurance claims adjusters nationwide is a tool used by the company to establish performance goals. On surface level, this seems like a great idea, but once you dig a bit deeper, it is easy to see that this has been put in place to save State Farm money and cheat their policyholders. In one instance, the manual requires State Farm claims adjusters to pay less than “book value” in 65% of their yearly car claims.
During the trial, a State Farm secretary by the name of Marilyn Paulson revealed to the jury that she formally complained to her bosses about Summers’s unethical behavior in 1970, but she was told to “mind her [own] business”. Other State Farm employees including supervisors and claims adjusters also testified that they were regularly put under pressure to alter documents in an attempt to lower settlement values for policyholders. One claims representative based in Colorado told the jury he was instructed to place partial blame on the policyholders, even when they were faultless in their accidents.
In only three hours, the jury determined that State Farm acted unreasonably when the company refused to settle the original accident case. The jury decided to award Mr. Campbell a whopping $145,000,000 payout in punitive damages and an additional $2,600,000 in compensatory damages.
After this ruling, the trial court greatly reduced the payout to $25,000,000 in punitive damages and $1,000,000 in compensatory damages, but this was overruled after it was successfully appealed and taken to the Utah Supreme Court.
Middler v. State Farm Insurance Companies
Ronald S. Middler was an exemplary employee for State Farm who worked for the company for over 25 years. He had successfully navigated multiple positions before being promoted to claims superintendent and subsequently winning the Commemorative Award given by the company’s Deputy Regional Vice President, Richard Wadley. However, things quickly took a turn in 1993.
On March 31, 1993, Middler filed a complaint against State Farm Insurance Companies largely based on his demotion from claims superintendent to claims adjuster. In the complaint, Middler outlines in great detail how the insurance company conducts business behind closed doors.
During this time, State Farm was using an in-house “special investigation unit”, commonly referred to as simply “SIU”. The SIU handled approximately 98% of claims that involved property damage and personal injury claims submitted by lower-class minorities, including African-Americans, Asians, Indians, and other policyholders with foreign names or backgrounds. Seems a bit suspicious, no?
The cases handled by the Special Investigation Unit were rarely ever settled, and if they were, it never happened in a prompt or timely manner. Investigators and claims adjusters were encouraged (by their superiors) to stall during investigations, needlessly dragging out the process in an attempt to give them more time to discover pre-textual justification for denying the claim.
Evidence showed that claims sent to the unit were not handled professionally. If a particular policyholder or attorney’s claim was sent to the SIU, it was commonplace for it to languish over large amounts of time. Settlement offers were few and far between, and the offers made were a mere fraction of the true value of the total damages and injuries. In most cases, the offer was made the day before trial was set to start. Because of this, the average payout for a bodily injury claim (soft tissue) handled by the Special Investigation Unit was far less than the amount of the injured policyholder’s medical expenses. Over half of all claims assigned to the SIU were terminated without ever making any payouts to claimants, and the average payment to injured victims was less than 1/9th of what they would have been paid had they worked with a non-SIU claims representative of State Farm.
From its beginning, the Special Investigation Unit kept a track of how much money they were saving State Farm by using bad faith tactics when handling policyholder claims. In addition to this, if a particular attorney’s or client’s claim was sent to the SIU, they would purposely allow the claim to sit and languish for long periods of time, needlessly dragging out the process. Settlement offers were few and far between, and any offers that were ever officially made were only a fraction of what the victim actually deserved.
Ronald Middler provided undeniable proof that State Farm would actively cheat clients, destroy documents, discriminate against their clients, and care about nothing else outside of maximizing their profits. The general public is lucky to have someone on the “inside”(Middler, a former insurance against) who was willing to expose the unethical ways of American insurance companies.
Robinson v. State Farm Mutual Automobile Insurance Company
In this case, State Farm was hit with a large verdict in the favor of the plaintiff after a dispute related to Medpay coverage and payments under a client’s policy. Ms. Robinson, a State Farm policyholder, was injured in a 1992 car accident when her vehicle lost control. She suffered a herniated disk and chose to sue the tire company for her injuries. While the suit was pending, she submitted her medical bills to her insurance company, State Farm. Unfortunately, an adjuster refused to pay the majority of her medical expenses because they were more than the medical payments coverage limit of $25,000. Though he did not officially deny the claim, he said he did not have enough information to support additional payments.
The adjuster acted in bad faith by attempting to bolster his decision with an “expert testimony” from an independent medical company that never even examined the injured plaintiff. The adjuster also obtained an opinion from a local medical professional with a reputation for working closely with many local insurance defense cases. After two years of payment delays, Ms. Robinson decided to sue State Farm.
Right after the lawsuit was filed, State Farm decided to finally pay Ms. Robinson’s policy limits. However, the case continued because Ms. Robinson alleged bad faith. In court, she alleged that their insurance adjusters knowingly postponed her claim using bogus medical reports of physicians who never met her, and cannot be trusted. In addition tot his, she presented testimony that indicated State Farm had a corporate plan in place to delay claims payouts, and they purposely put their clients under financial stress to coerce them into settling their claims for small amounts of money. Ms. Robinson was awarded $9,600,000, of which 99% consisted of punitive damages.
Betty Olson v. State Farm Mutual Insurance Company
In Arizona, a jury awarded six million dollars to Betty Olson, a woman who had incurred a lawsuit and credit damage after refusing to accept her insurance company’s decision to repair her car rather than total it. The matter started when Olson leased a brand new 1993 Cadillac Seville. This should undoubtedly be an exciting time in life, but unfortunately, the car was severely damaged by a drunk driver before she had even put 1,000 miles on the odometer. Though the damage was dire, the insurance company, State Farm, wanted to repair the car rather than total it and provide a payout for a new vehicle.
During trial, evidence revealed it would have cost the company approximately $45,000 to “total” the vehicle, and the company’s repair estimates were $12,191.06. Olson initially agreed to this and signed a repair authorization in that amount, but the repairs ended up taking over six months and cost a total of $31,389. Once she was aware of the repair costs, she refused to pick up the vehicle and demanded a new vehicle. State Farm would not settle and attempted to force her to accept the vehicle, but while this was taking place, the Cadillac was repossessed by the leasing company and sold at auction. The leasing company then sued the insured client for $11,000 and reported her to a national credit bureau as being in default of her lease obligations.
During trial, the plaintiff’s lawyers used countless documents and expert testimonies to show a pattern of bad faith and shady behavior on State Farm’s part. They also provided expert testimony from a body shop manager, who stated the car should have been considered totaled due to severe frame and body damage. State Farm’s representatives testified that the length of the repair time was not at all unreasonable, and attempted to show evidence of another claim in which a car took five years to be completely repaired. However, the jury did not buy the defense. In under 6 hours, Betty Olson was awarded $1,000,000 in recovery, and an additional $5,000,000 in punitive damages.
This should be a lesson to all insurance companies: handle your clients’ claims promptly. If you don’t, it could cost you five million dollars.
Christopher v. Residence Mutual Insurance Company
This verdict took place on March 15, 2012. In this case, Residence Mutual Insurance Company was determined to be liable for over eight million dollars due to its failure to properly adjust and pay a homeowner’s insurance claim. A construction dump truck collided with the policyholder’s residence and caused a gas line rupture, engulfing the house in flames and burning it to ashes. The policyholder also sued the driver of the truck, their employer, the city of Los Angeles, and the developer that hired the trucking company.
Throughout this process, Residence Mutual Insurance Company committed multiple errors. They initially underpaid the claim, but made matters worse by trying to use their subrogation rights to attempt to reimburse themselves against the other third parties the policyholders had lawsuits against. The insurance company grossly interfered with the policyholders’ rights to suit these other parties, and they were found to have improperly reimbursed themselves from the developer’s $750,000 limits.
Insurers do not have the right to unilaterally pursue subrogation rights in cases where there is a dispute about benefits and coverage amounts. Residence Mutual Insurance Company is yet another example of improper insurance industry conduct.
Palm Springs Pump v. Peerless Insurance Company
In this case, Peerless Insurance Company provided property insurance to a drilling rig operator working in oilfields. The rig ended up failing and the insurance company failed to acknowledge any sort of insurance coverage for over six months after being notified of the claim. Because of this, the individual who owned the rig ended up losing an extreme amount of profit because they were unable to complete drilling and oilfield jobs without proper equipment.
In court, the jury found that Peerless Insurance Company had unreasonably delayed this claim, as well as its adjacent investigations and processing. The court found that the carelessness of this delay called for some sort of punitive damages.
In total, the drilling rig operator was awarded $1,376,498 in lost profits, $160,000 in litigation costs, and an astonishing $3,500,000 in punitive damages, resulting in a total exceeding five million dollars.
Peerless has no reasonable explanation for why they did not promptly investigate, process, and pay this claim. Because of this, they lost over three millions.
Davis v. Fidelity Nat’l Title Ins. Co.
In this title insurance case, the client claimed that their insurance company failed to process and pay their claim in a timely manner. The client, who was a real estate professional, claimed that they were losing profits from no being able to develop residential properties because of property title issues stemming from th case.
Ultimately, it took the insurance company nearly five years to resolve the claim and complete payouts. After trial, the court warded the insured individual with $393, 227.31 in compensatory damages, $168,467.31 to cover all litigation expenses, a whopping $1,572,909.24 in punitive damages, and an additional $96.610.04 in interest. This case serves as a great example as to why failure to promptly adjust a claim can be devastating for an insurance company. When you don’t pay promptly, penalties will be heavy. And sometimes, it can result in a million dollar loss.
Fresno Rock Taco, Zone Sports Center v. National Surety Corporation
This property theft case was concluded in 2014. In this case, Fresno Rock Taco and its co-owner Sports Zone made a claim that tens of thousands of dollars of property and equipment was wrongfully stolen from their establishment. Upon alerting their insurance company, the insurer did nothing and chose to refuse to investigate the matter any further. On top of this, the company then provided the California Department of Insurance with false information, resulting in the state of California conducting a raid. After the insurer demanded an EUO (examination under oath) and chose to deny their clients’ claim, it was found that the EUO was simply a pretext to the denial and a setup; they were going to deny the claim the whole time. The verdict of this case resulted in $2.84 million for the insured clients.
Pusch & Nguyen | Harris County Car Accident Lawyers
Bad faith litigation is something that can absolutely change your life. If you’ve been hurt in an accident and you’re attempting to recover from your injuries and property losses related to your auto or home insurance policy, insurance companies may not care about your needs. This is money that you’re rightfully owed, and it is a piece of your financial situation that is absolutely paramount to your total recovery. When an insurance company acts in bad faith, it can result in a tragic loss for you, your family, and your loved ones.
If you believe that your insurance company is acting in bad faith, you need to make sure you align yourself with a Houston car accident attorney. If this is what you’re going through and you need assistance, the Pusch & Nguyen Law Firm is here for you. Our experienced lawyers, case managers, and litigation experts have years of experience and a proven track record of providing clients with favorable outcomes in court. For more information on how we can help you, contact us today at 713-524-8139.