Insurance Bad Faith: Biased Experts and a Failure to Investigate

Insurance companies have a duty to act in good faith when they offer insurance, when they work with insureds, and when they investigate and pay on claims. 

In other words, operating in good faith means more than just honoring the terms of the insurance contract. It’s integral to the operation of an insurance business. 

Numerous court cases have found that insurance companies have a duty to act in good faith even if the insureds claim is ultimately and rightly denied. When insurance companies fail to act in good faith in the processing of a claim and a lot of money is involved, insureds have every right to bring a lawsuit for insurance bad faith.

Responsible Use of Experts

Insurance companies often work with experts to determine the cause of damage and the extent of a loss.

  • An expert may investigate the cause of a home or business fire, storm damage or flood. 
  • An expert may investigate a property where an accident or injuries occurred. 
  • An expert may review medical records and provide an opinion about a disability claim. 

The insurance company will then use this information to support or deny a claim. 

It’s reasonable to rely on the opinion of experts when making a claim determination and that has often been used as a defense against insurance bad faith claims in court. But in the 2020 case of Fadeeff v. State Farm General Ins. Co., (50 Cal. App. 5th 94), a California appellate court said that an insurance company’s reliance on an outside expert didn’t insulate it from a legal claim of bad faith. 

The court said that an independent expert’s opinion is only one factor in an investigation. In the case in question, State Farm Insurance paid for cleaning, repairs and some living expenses for homeowners whose home was damaged by a wildfire. It denied payment for other repairs and for content replacement. 

The Fadeeff’s claimed State Farm Insurance had acted in bad faith by relying upon an outside expert whose credentials were questionable and who did an inadequate job of investigating the extent of damages to their home. Additionally, their attorney said:

  • Some of the damage to the home resulted from power washing that State Farm had recommended to the homeowner
  • State Farm’s position had been inconsistent

The homeowners hired their own certified expert who documented significantly more damage. 

The Fadeeff’s went to court seeking punitive damages. Their claim was rejected by a lower court (the company had relied on an expert), but it was reversed on appeal and they were awarded punitive damages and costs. The court cited the case of (Wilson, supra, 42 Cal.4th at pp. 720-721) which said:

“While an insurance company has no obligation under the implied covenant of good faith and fair dealing to pay every claim its insured makes, the insurer cannot deny the claim `without fully investigating the grounds for its denial.’

The Fadeeff’s could now move forward with their initial bad faith insurance claim. 

Bad faith insurance claims are complex but when the stakes are high – in the case of the Fadeeff’s the value of their denied claim was $75,000 – it may well be worth talking to a consumer insurance attorney. 

Don’t Assume Nothing Can Be Done. Talk to a Lawyer

The Fell Law Firm has experience representing homeowners and business owners in insurance bad faith cases in Dallas-Richardson-Plano area. Mr. Fell can review the facts of your case and advise on the best option to move forward. Call 972-450-1418 or complete our online contact form to schedule a consultation.

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