On June 3, a Jefferson County, Kentucky jury awarded a woman $3.8 million in a bad faith suit against her doctor’s insurer, American Physican’s Assurance Corp. Shortly after Debbie Daniels underwent a hysterectomy and tummy tuck, her insision opened, necesitating emergency surgery and a lengthy and difficult recovery.
The insurer’s claim file indicated that, although it determined that its insured was liable and evaluated the claim at $1 million, it refused to enter into settlement negotiations for two years before offering $75,000, according to the Louisville Courier-Journal. Daniels eventually settled with her doctor for $650,000, and reserved the right to sue American Physican’s Assurance.
I don’t claim to know much about Kentucky law, and can’t offer any opinion on whether the verdict will stand up on appeal, but it isn’t likely that such a claim would survive in Alabama, where longstanding law provides that “a party may not bring an action against an insurance company for bad-faith failure to pay an insurance claim if the party does not have a direct contractual relationship with the insurance company.” Williams v State Farm Mut. Auto. Ins. Co., 886 So.2d 72 (Ala. 2003).
June 11, 2009 at 11:41 am |
Thomas,
Interesting take on whether it shoudl be settled. In reality I am glad the insurance company lost. How much would we bet this is a shareholder and not a mutual insurance company. As a risk manager it gets old when insurnace companies continually delay delay delay when it is obvious they are obligated to. And this comes from a RM who has worked at a firm with 125 lawyers. How are individuals supposed to be compensated for what, in this case, was clearly gross negligence and willful misconduct.
As for direct contractual relationship, for companies that is easy, we ensure we are included or named as additional insured within their GL and sometimes E&O insurance policies. Under the logic of no direct contractual relationship, how does that change when the insurance company starts negotiating directly with the insured or their representative? The fact that they did settle with the right of lawsuit implies a direct relationship. I am talking outside my butt on this one but this is not the McDonalds coffee lawsuit.
June 11, 2009 at 11:58 am |
Agreed that this isn’t the coffee lawsuit. Also, there is some law here that addresses the situation where there is direct negotiation by a carrier with a third party. I believe the cases hold that where there is an independent agreement between the two (whether oral or in writing), that is a “direct contractual relationship,” and subjects a carrier to third party bad faith liability. In the case I’m thinking of, the carrier agreed with an auto accident claimant to repair his vehicle, and then reneged on that promise.