All in Bad Faith?
Bad faith liability is a fact of doing insurance business and no carrier is immune to the exposure. Insurers across the U.S. are susceptible when they deny coverage, reject settlement offers and do not investigate claims promptly. That’s why we’ve looked into our North America Treaty reinsurance claims over the last 25 years, to see what they tell us about the business that generated the bad faith claims.
A threat of bad faith can hang over many proper claim decisions. When those decisions demonstrate malice or lack a reasonable basis, depending on the state law, that threat is more likely to become a bad faith lawsuit. Bad faith lawsuits take financial and staff resources away from the important everyday business of underwriting and servicing policies, so it is worth knowing from where bad faith lawsuits arise.
Personal auto dominates our bad faith claims inventory, which isn’t surprising as claim counts are higher there than in other lines. Also, economic damages often exceed the low policy limits available to pay auto claims, making it difficult to settle with all parties within the limits. General Liability and Commercial Multi-Peril policies are next in the bad faith table, followed by commercial auto, homeowners/farm owners, professional liability and workers’ comp. policies.
Looking at the states where bad faith claim activity is highest, Florida and California are the leaders. Florida’s bad faith claims were mostly in personal auto, while California’s came out of general liability and homeowners lines.
It’s important to note that several pending bad faith bills and cases in the U.S. could rewrite the law, changing the claims picture in the next year or even the next month. But we believe our survey provides a very useful snapshot of bad faith liability as it stands.
Find out more from the U.S. law survey.