BAD FAITH INSURANCE PRACTICES

Bad faith is the short-hand term for an insurer failing to act with good faith and deal fairly with one of its insureds. Theoretically, the law expects that a person's insurer will treat them fairly and with good faith - not denying a claim without a reasonable basis. Most insureds expect to be treated fairly by their own insurer.  


But we all know that insurers deny claims without a reasonable basis all the time. In the 1980's the Texas Supreme Court decided an opinion with regard to a workers compensation claim. In that case the Court said that an injured worker, who had a workers compensation claim, was an insured of the workers compensation insurer and was entitled to be treat fairly and in good faith by the insurer. If the insurer did not treat him fairly - by making a reasonable investigation and having a reasonable basis if the claim was denied - and act in good faith with him - by not unreasonably delaying or denying benefits he was entitled to - the workers could sue the insurer for "bad faith" and obtain damages for the delay and/or denial. Later decisions applied this same duty to all first party insurance claims.


But, over the last 20 years, the principle of holding insurers to this duty of good faith and fair dealing has been eroded and reduced by subsequent appellate opinions, to the point that it barely survives today. A case in point is the following:

Thompson v. Zurich American Ins. Co. ,(C.A.5 (Tex.))

Insurance - Insurer did not act in bad faith in relying on expert's opinion to initially deny coverage.

The mere fact that the orthopedic surgeon on whose medical opinion a workers' compensation insurer relied in initially denying coverage for an injury to an employee's knee, on the theory that the injury was not caused or aggravated by any work-related accident but resulted from a preexisting condition, had a history of working extensively for insurers, had not treated the employee but relied exclusively on medical reports, and rendered an opinion contrary to that of other physicians, one of whom did not examine the employee until after coverage was denied and the other of whom did not communicate his contrary findings to the insurer, was insufficient, without more, to show that insurer acted in bad faith in relying on surgeon's opinion to initially deny coverage. A bad faith claim could likewise not be based on the insurer's five- month delay in paying the claim after another doctor's report partially controverted that of the insurer's expert. In this case, it appears that a full investigation by the insurer is not required to deny a claim. A reasonable investigation of a claim would include obtaining all treating doctors' reports. In this case, the insurer could rely on an opinion by one of its doctors who never examined the injured worker. Further, there was no duty for the insurer to investigate and obtain medical records from the treating doctors. Once the insurer got a report from its doctor that it could use to deny the claim, it was not liable. Further, even when it got a medical report that put it on notice that its doctor could be wrong, the insurer had no duty to investigate further. The worker loses because, in reality, there is no longer a duty by his insurer to treat him fairly and with good faith. Apparently the duty of an insurer now is to obtain an opinion it likes and then stop any further investigation.  If you have a claim against an insurer, the best practice is to get an experienced lawyer and make sure that ALL the information necessary for the insurer to determine the claim is presented to the insurer as soon as possible and with a demand for coverage and benefits. You can no longer rely on the principle that your insurer has to treat you fairly and with good faith.

Lost wages or income due to personal injury

If you are injured in a "tort" claim, you generally have the right to be compensated for your lost wages or lost income due to your inability to work or earn income due to your injury. In other words, if you cannot work due to your injuries, the at-fault party should be responsible to pay your lost income.

Generally, you are entitled to recover your lost income even if you use your sick leave and don't specifically lose any income. This is because you did lose something - the sick time that you would have had otherwise. Each state has its own specific rules about what lost income is recoverable


In Texas, you are entitled to be reimbursed your past wages with a reduction for the federal income taxes you would have paid on such wages. This means that in every case, an expert (usually an economist or a CPA) will be required to testify about your lost income and the taxes you would have paid on the income.

If there is evidence that it is probable that you will lose income in the future due to your injuries or the effects of the injuries, you can also be compensated for the probable future lost income. In this case you would have to have the expert testify to the present value of the lost future income with a reduction again for income taxes that would likely have to be paid on the income. (Generally, you would also want the expert to testify about the effect of inflation on your likely future income. This means that the expert would have to testify about probable future inflation, then discount the probable lost income for its present value and then reduce the income by probable taxes that would have been paid on the income.)

In summary, if you have any significant lost income due to injuries in a tort claim, you will likely need assistance from an experience personal injury lawyer who knows the law and can obtain the proper evidence to prove your lost wages as required by the law.

What damages can be awarded to me for a personal injury claim?

If you are injured due to an act of negligence or other tort (torts are violations of standards of care that result in injury, such as an injury caused by someone being negligent, a product defect causing an injury or an intentional act such as an assault), you can be awarded damages for the medical bills incurred to treat your injuries, lost wages or income due to your injuries, compensation for your pain and suffering and mental anguish due to your injuries, compensation for any impairment due to your injuries and compensation for any disfigurement resulting from your injuries.

The first and many times most important element of damages is likely to be compensation to reimburse you or pay for medical bills you incur to treat your injuries. In an auto collision, you may injure your neck or back or suffer an injury or fracture to some other part of your body. The law generally allows you to seek an award of damages to compensate you for the cost of medical treatment for the injuries you incurred in the collision. Technically, you are entitled to be compensated for the "reasonable cost of necessary medical treatment." You are entitled to be reimbursed for the medical bills you incurred prior to any settlement or judgment and also for those medical bills that in "reasonable medical probability" you will incur for treatment of those injuries in the future.

Generally, the past medical bills are easy to determine. Complications in determining the amount of past medical bills necessary to treat your injuries occur when you have a pre-existing condition that was being treated or where your treatment includes unrelated other medical conditions.

Future medical bills are generally harder to establish. In order to prove future medical bills, a qualified medical provider will have to establish the necessity and the probability of the future treatment. Even then, it is not a guarantee since the term probability means that there is some chance that no treatment will be necessary. Generally, future medical bills have to be discounted (or reduced in amount) by the delay into the future in which they will be paid. In other words, if medical expenses are expected to be incurred 20 years from now, an economist will have to calculate and testify about what amount today, held in an interest bearing account, will pay for the medical bills in the future. (The economist should also take into account the effect of inflation on future medical costs and both increase and reduce the future medical expenses to "present value.")

In summary, although it would seem simple to determine the medical expenses that should be awarded to someone injured in a "tort" claim, in only the most insignificant injury claims is that the case. In claims involving significant medical treatment and cost and potential future medical treatment, the determination and proof of such medical bills is the task for an expert in personal injury law.

What damages can I be awarded if I am in accident

Many folks wonder what they can obtain as far as compensation when they are in an accident. As usual when it comes to the law, it depends on the specific of the accident. 

For example, if you are in an auto collision, you can generally recover damages for the property damage you incur, the medical bills you incur to treat your injuries, the wages or income you lost due to your injuries and compensation for your pain and suffering and mental anguish due to your injuries. 

 Today I will discuss the property damage aspect of your claim.

If you are in an auto collision and your vehicle is damaged due the fault of a third person, you are entitled under the law to recover either the repair cost or the market value of the vehicle. The insurer for the at-fault driver gets to decide which one. Generally, if the cost to repair and provide you a replacement vehicle during the reasonable time to repair the damaged vehicle is less than the market value of the damaged vehicle, the insurer will pay for the repairs to the vehicle. All the insurer owes is the cost to repair the vehicle to the condition it was in immediately prior to the collision. So, if there are pre-existing dents or rust, the insurer does not have to pay to repair those areas.

If the insurer decides to "total" the vehicle, the insurer owes the market value of the vehicle. Many times, with low down payments and long term payment schedules, I see vehicle owners who owe more money to the lien holder than the market value of the vehicle. (This is called "being upside down.") Even though the collision was not your fault, the law requires that only the market value be paid and not the amount owing to the lien holder. Finding this out can be quite traumatic on the innocent driver.

There are ways to try to protect yourself from being "upside down." You can make a larger down payment on the vehicle when you purchase it. You can purchase a used car - generally new cars sell at a premium and, when you drive the vehicle off the lot, you lose a substantial amount of market value. Or, you can purchase "gap" insurance when you obtain a loan to pay for the vehicle. "Gap" insurance is a relatively new loan product, and it does exactly what it says - it fills in any "gap" between the market price of the vehicle and amount owed to the lien holder. Someone buying an expensive new vehicle with a small down payment and a long payment schedule, should purchase "gap" insurance - you will be glad if you are in a collision.

If the vehicle is repairable, then by law you are entitled to a replacement vehicle during the reasonable time to repair the vehicle. If the car is "totaled" the law does not provide for a replacement vehicle until you can purchase another vehicle. This seems wrong, but, again, it is the law as determined by the Courts over the last 100 years.

So, in summary, property damage generally is relatively "cut and dried." The vehicle is either totaled or repairable. If totaled you get the actual market value for the vehicle. If the vehicle is repairable, you get the damage done in this specific collision repaired and a replacement vehicle during the reasonable time it takes to repair the vehicle.

Next time we will talk elements of damages for bodily injury claims.

Contigency Fee Contracts

Most individuals who hire lawyers to represent them in personal injury claims enter into contingency fee contracts with the lawyer. A contingency fee contract means that the lawyer agrees to represent the person and will be compensated by receiving a portion of any recovery. The lawyer is not paid as the case goes along. Generally, the lawyer advances any costs necessary to pursue the injury claim. The client pays nothing until there is a monetary recovery. If there is no monetary recovery to the client, the lawyer does not get paid. Generally, in that circumstance the lawyer also is not reimbursed the expenses he has advanced. 

Contingency fee attorney representation contracts allow individuals with little or no money or assets to hire a lawyer, when otherwise they would not be able to do so. Without the ability of the individual to hire a lawyer on a contingency fee basis, the individual would not be able to hire a lawyer. Basically, lack of the finances would mean that the individual would be unable to pursue his claim for monetary damages. 

Corporations and insurance companies have plenty of money to hire and pay lawyers on an hourly basis. They can pay the lawyer as he or she does the work - generally their lawyers are paid based on the number of hours that he or she works on the case.

A person severely injured due to an auto collision, unless they are independently wealthy, will be unable to pay a lawyer like a corporation or insurer does. The only way the injured person can hire a lawyer to pursue their injury claim is by hiring the lawyer on a contingency contract. 

A benefit of this method of representation is that the lawyer for the injured person will evaluate the chances of success early on during the representation. A lawyer who is only going to be paid if a successful monetary recovery is made will not continue working on a case if the case will not result in a fee proportionate to the work involved in the case. 


For example, in a traffic intersection collision case, the lawyer hired by the injured person will have a great incentive to confirm that his client was injured due to the fault of the other driver. If he finds out that his client was the one at fault, the lawyer working on a contingency fee contract will withdraw from the case. This incentive to only take meritorious cases is strong reason to allow lawyers to be retained via a contingency fee contract. (A lawyer paid based on the hours worked on the case, regardless of the outcome, would have the incentive to continue to work on the case.

In summary, contingency fee contracts allow those without financial means to hire lawyers to represent them in pursuit of compensation for damages incurred. Additionally, contingency fee contracts have the desirable incentive of having lawyers refrain from pursuing non-meritorious claims.

Premise Liability - Slip and Fall - Part 3

If you are classified as a licensee - or social guest - the owner of the premises only owes you the duty to warn you of dangers that the premises owner already knows about. In other words, the premises owner does not owe you a duty to reasonably inspect the premises for dangers. The premises owner can close his eyes to danger and then not be liable if the danger unknown to him because he closed his eyes injures you. 

If you are classified as a trespasser, the only duty the premises owner owes to you is not to intentionally injure you. As I said in an earlier post, trespasser in this case means all others except invitees and licensees. 

In an earlier post, I explained that you can be an invitee on the store's sales floor but become a trespasser if you enter into a non-sales area. 

For example, you are having your tires replaced. If you leave the sales area or the waiting area to get a closer look at the tires - to make sure they are putting on the ones that you bought - you have become a trespasser. And the only duty the store owes you is not to intentionally injure you. They can know that there is a hidden danger with which you will come into contact and become injured and yet they do not owe you even the duty to warn you. 

Most people would not think of themselves as trespassers if they went to assure themselves that the proper tires were being installed. But the law would. And it makes a huge difference in the duty owed by the premises owner. 


This completes my posts on premises liability. Call me or email me if you have any questions. 

Rick 

Premises Liability - Slip and Fall - Part 2

Part 2. 

Once you are categorized with regard to your relationship to the premises, the duty of the premises owner to you is known. Then you can attempt to prove your claim.


Today I am going to discuss the most likely premises claim - that of an invitee (business customer) injured while on the business premises.


You are shopping and slip and fall injuring your knee. You call a lawyer wondering if the store is responsible for your medical bills and lost wages. 

If the lawyer knows what he or she is doing, the first question asked will be: What caused you to fall? This is because the burden is on the injured person  to prove what premises defect caused them to fall. 

If you know what caused you to fall, the second question should be: How did it get there? This is because it is the burden of the injured person to prove how premises defect was created or how long it had been on the floor. 

Texas law requires the injured person to prove that there was an unreasonably dangerous condition and that the condition was known by the premises owner or that the premises owner should have known of the danger - generally this second method (should have known) is established by proving how long the premises defect had existed before your injury.


The next question from the lawyer should be: Was there any warning of the premises defect to you? This is because the burden is on the injured person to prove that the premises owner had not remedied or warned of the dangerous condition. 

If you gave the proper answers, the question then becomes: Was it negligent for the premises owner to fail to remedy or warn of the dangerous condition?


And, if it was negligent: Was that negligence a proximate cause of the injuries to you?

As you can see, there are large burdens on the injured person and no burden on the premises owner - until there is a finding of negligence and proximate cause.


Once there is such a finding, the burden is on the premises owner to prove that you should have seen or avoided the dangerous condition. This is called contributory negligence and whatever part you played in contributing to your injuries will be deducted from any damages awarded. 

So, if you can prove what caused your fall, that the store knew or should have known of the defect, that the store failed to warn you of the defect, that the store's failure to warn you or fix the defect was negligence and that such negligence was a proximate cause of your injuries, the store may owe you damages - unless your fault contributed more to your injuries than the store's fault. 

This is the burden of proof on the invitee - the store's business customer. The burden of proof is even greater on licensees and trespassers.


I will discuss more in my next entry - Part 3.