April 14, 2021

Bad Faith Myth: “Claims Should Not be Adversarial”

Many bad faith cases involve plaintiff allegations that an insurer treating the process as an adversarial one acts in bad faith.

I’m not buying it.

America’s system of civil jurisprudence, which many view as the best and fairest of any system, is based on an adversarial process. Each side in litigation presents its case to a judge or jury. They do so in the strongest possible terms. By a process where each side advocates as strongly as possible its positions, the judge or jury receives both sides of the story and can use that information to arrive at a just and equitable decision. Our entire system of civil jurisprudence is based on the notion that the most fair and just result comes from an adversarial process. Why this would be legit for our foundational legal system but illegitimate in the context of differences of opinions on claim disputes is beyond me.

This bad faith argument often arises in uninsured/underinsured motorist claims. Plaintiffs argue that such claims should not be adversarial. Like it or not, however, handling uninsured motorist claims involves aspects of an adversarial process. The damages an insured can recover under his or her uninsured coverage equal the damages he or she might recover in a third-party liability claim against the tortfeasor.

Of course, third-party liability claims are quintessential examples of claims resolved through adversarial processes. In a third-party liability claim, an injured person asserts a claim, often initiating a lawsuit, against the other driver. The other driver’s insurer defends its insured against this third-party claim. If the claim goes to litigation, that insurer hires a lawyer to defend its policyholder against the claim or lawsuit.

The purpose of uninsured/underinsured motorist coverage is to try to put an insured in the same position he or she would have been in, had the other driver/tortfeasor possessed liability insurance or adequate coverage limits. Therefore, insurance claim industry practice recognizes that handling uninsured/underinsured motorist claims will include adversarial processes inherent in handling of third-party liability claims, since the purpose of the coverage is to put the insured in the same position as if the tortfeasor had adequate liability coverage.

Additional disputes often arise in property damage claims, representing honest differences of opinion. No claims industry standard, no industry consensus claim-handling “rules of the road” tells adjusters that the claims must never be adversarial. Usually, they are not. However, honest disputes and differences of opinion arise that can reasonably and predictably spawn adversarial situations. While many if not most claims progress smoothly, by their very nature they can become adversarial through no fault of an adjuster or the insurer.

Conflict and clash of opinions is an occasional fact of life in the real world of insurance claims. Absent evidence that the clash of opinions was motivated by (a) adjuster animus toward the plaintiff or (b) adjuster expectation of financial gain from the insurer’s stance, it is a Gumby-like stretch to equate this with a breach of insurance claim industry customs, standards or norms.

While many if not most claims resolve without litigation or conflict, inherent in the claims process are frequent differences of opinion. These can be differences of opinion regarding coverage, damages or both. At the policyholder or third-party claimant decides to initiate a lawsuit, then the claim enters a new forum. That forum is the litigation process which is inherently adversarial. The policyholder or the third-party claimant typically topples that first domino culminating in the litigation, and adversarial process. No consensus insurance claim industry standard requires that the claim process not be adversarial, nor does any consensus insurance claim industry yardstick equate a claim’s evolution into an adversarial process as bad faith claim-handling.

Thanks for reading. I am a claim consultant who helps nationwide clients assess insurance claim-handling to improve litigation outcomes through expert evaluation and testimony on high-stakes cases. If you have a comment, a suggestion for a future topic, or a question about your own case, contact me at kevin@kevinquinley.com or claimscoach@gmail.com

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