As lawyers we see many cases of unfair claim denials by insurance companies. In my work I have reviewed hundreds of claim files and attorney files, and I have had the task of using these documents as exhibits in trial. I often get calls asking for advice on how to best write letters to an insurer that is committing bad faith. Here are 10 of the most costly MISTAKES that I see lawyers make.
MISTAKE NO. 1:
Trying to set up a bad faith case. Some lawyers think that when they see bad faith behavior by an insurance company, they need to proceed carefully so as to snap the trap before the company can get wise and get away. I think just the opposite.
ADVICE: The best way to set up a company that is acting in bad faith is to give it every opportunity to do the right thing. Don’t hide the ball and hope they will commit bad faith. Give the claim reps all of the facts, tell them of the applicable law. Ask them to reconsider. Ask them to do the right thing. If they do the right thing … that’s great. If they ignore you, and especially if they ignore you over and over again, then they have done a better job of setting themselves up than you can ever do. Don’t worry that you will lose out on a bad faith case. Unfortunately, there are plenty of them. You’ll see lots more of them, believe me. What your client here needs is the coverage. If you behave the way I am telling you here, you will either get that coverage (assuming your client deserves it), or your client will have a very obvious case of bad faith.
MISTAKE NO. 2:
Writing nasty letters to the company. When it comes time to try the case, letters like that will make you look rude and antagonistic. That kind of lawyer is exactly the kind that can make a jury line on the side of the insurance company, and rightfully so. In fact, one of the first lines of defense in a bad faith case is for the insurance company to point at the plaintiff’s lawyer and suggest that he or she is the real driving force for the entire case. And it is a very effective defense, because nasty behavior by the plaintiff’s lawyer distracts the jury’s attention from nasty behavior by the insurance company.
ADVICE: Instead, just tell them that there is no basis for denial. Give them the accurate facts and the accurate law. Tell them that your client needs his coverage, tell them why he needs it, and offer any help you can give to assist the company in evaluating the claim. If they ignore you, then write them again, and again, and even again if necessary. Be firm, be persistent, but be nice.
MISTAKE NO. 3:
Threatening to sue for bad faith. As with rude letters, this is NOT the tone that you want to establish, and in fact it is just the opposite. If a bad faith lawsuit does eventually become necessary, your letters will become exhibits that make you look like a litigious jerk, and jurors will rightfully line up against you.
ADVICE: Don’t give them that ammunition. Instead, be courteous, be fair, be forthcoming. Don’t threaten a lawsuit and don’t go looking for a lawsuit. Do everything that you can to avoid a lawsuit. If you do that, and then still end up needing to sue, you will have the high ground and it will serve you well.
MISTAKE NO. 4:
Writing long winded letters in a lecturing tone. These will just diffuse whatever point you legitimately have, and make confusing exhibits if a jury ever has to decide if bad faith has taken place.
ADVICE: Keep your letters short, to the point, and end by offering whatever help you can give. When you get no response, write again. Three different letters asking for help, all short and to the point, and all ignored by the company, are much better than one long winded one.
MISTAKE NO. 5:
Overreaching on the value of the claim. Too many lawyers think their job is to get everything they can, and when they get that, to get some more.
ADVICE: If you can get what is fair, then you have done a good job. The ugly habit of overreaching is death to a bad faith claim. In trial, the whole story you are trying to tell is one of a company that seeks to get every advantage it can over the policyholder. If the policyholder’s lawyer is playing the same game with the insurance company, the jury can smell it and the case is dead.
MISTAKE NO. 6:
Whining about my poor client. As with overreaching on the value of the claim, don’t exaggerate about your client either. It makes you look like the kind of lawyer you don’t want to be, and the kind of lawyer that juries rightfully frown on.
ADVICE: If your client is having problems because of the denial or delay in payment, by all means say so. But be fair about it. Don’t overplay it.
MISTAKE NO. 7:
Overusing hyperbole in our letters to the company. In our sense of outrage we often go looking for ways to express ourselves in the BIGGEST, MOST COLORFUL, and MOST EXTRAVAGANT terms we can concoct. The insurer’s conduct has hit a nerve with us, and we are hoping to hit a nerve with our language. Unfortunately, this kind of language does hit a nerve, but the reader (ultimately the jury) associates the pain it causes with the writer, not the insurer. At best, this kind of language just compromises your credibility.
ADVICE: Guard your credibility at all times. Use no exaggeration. If you are right and they are wrong, the plain facts are good enough. Look at your letters. Remove most all words ending with the letters “ly”. If the facts are clear, then just say the facts. You don’t need to introduce them with words like “clearly” or “obviously”. If the facts are horrible, then just tell the facts, and leave out your own assessment that they are horrible. This kind of letter writing, short and to the point, gains great credibility with the jury because they quickly gain a sense of trust with the writer.
MISTAKE NO. 8:
Delaying your response to the company. The insurance companies use delay on a policyholder the same way that you use hot water on a sticky jar lid … to loosen it up. As time passes, the policyholder softens up, gives in, and takes less. It is hard to complain about delay, though, when the policyholder’s own lawyer takes weeks or months to answer letters, or provide information.
ADVICE: What you need to do is never let the ball linger in your court. Always get it back in their court. Get them what they ask for, do it quick, and then ask if they need anything else.
MISTAKE NO. 9:
Making mistakes in information provided to the company. Many plaintiff’s lawyers are extremely busy. Some are like factories, processing cases like canned vegetables. This kind of case handling is a problem in the bad faith context. Inaccuracies in the information provided to the insurance company, or in the assessment of the law governing the claim, undermine the credibility of the claimant’s lawyer in the eyes of the bad faith jury. And of course the explanation of a mistake just makes the insurer’s claims of mistake about its own conduct all the more plausible.
ADVICE: Treat the case carefully. When you speak, make sure you are speaking accurately. When you represent the facts, or the law, just take the time to make sure you are correct. This is not the time to be inattentive.
MISTAKE NO. 10:
Failing to ask questions. If you have followed the advice set forth in paragraphs 1-9 above, you will have demonstrated that you are not playing games and not trying to hide the ball. Now it is time to see if the insurance company employees are willing to do the same. The insurance company has a duty to provide the insured with full and fair disclosure of the facts and the law on which it bases a denial. Giving the company the opportunity to live up to this duty is one of the best things you can do.
ADVICE: Always ask the company for specific information. What investigation have you conducted? What facts have you uncovered? Who have you interviewed? Will you supply us with copies of your evidence? For some reason insurance claims personnel frequently either refuse to answer or just plain ignore these requests. It is a passive way of telling you to go pound sand. When this happens, and it happens more often than not, the contrast between your open and honest approach and the cavalier attitude of the company personnel becomes more and more vivid. So ask the appropriate questions, and when they don’t answer, ask again. When they ignore you, they are only revealing their intent and their contempt.
SUMMARY
When lawyers commit the MISTAKES outlined above, they create fertile ground for confusion in the trial story. There is nothing hard about any of this. There is nothing complicated. A bad faith case is just about fairness on the one hand, and unfairness on the other. Keep the story simple. Be fair. Be prompt. Be courteous. Be honest. Sometimes the company will reciprocate. All too often it may not. When that happens the difference between how you have conducted yourself and how they have chosen to act will be one of great contrast. Juries have little trouble seeing the bad faith in cases like this, and are very motivated to do something about it.
PLEASE READ: PERSONAL MESSAGE FROM MIKE ABOUREZK
Do you need a brief on an insurance bad faith issue? Do you have questions about your case?
I’m happy to share whatever I can with you without charge. I have extensive briefs on nearly every issue surrounding insurance bad faith.
Here’s why I believe in sharing: The kind of defendants that you and I sue (insurance companies) have endless supplies of money, lawyers, and resources. For the policyholder and his lawyer, the imbalance is so great, the playing field so uneven that the only way lawyers can make headway with insurance companies is if we freely share information with each other.
Litigating with insurance companies without talking to other lawyers about their cases and what they are learning is like a hundred soldiers all isolated in their own foxholes with no way to communicate with any other foxhole. And yet, the company knows exactly where each foxhole is at, who is in it, and knows how to rain down the artillery on each one. By talking to other lawyers about their cases, I keep abreast of what is going outside my own foxhole. That makes me a lot more effective for my clients.
When one policyholder wins, that victory helps me, my clients and all other policyholders. That’s why we must work together to share information. I don’t see this as an option. To me, sharing information is an obligation, an obligation that I keep and practice every day.
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So whatever you need briefs, advice, or suggestions, please don’t hesitate to call. I’m interested in hearing about your case. And I’ll do my best to freely share anything I can with you. No charge, and no obligations.