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Insurance Practices, Claims and Coverage Issues

1/19/2008
Sharon Tompkins
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New Law Requires Insurance Companies in Maryland to Act in Good Faith

Under a newly enacted statute, insurance companies must act in "good faith" in dealing with property and casualty (car accident) claims. "Good faith" is "an informed judgment based on honesty and diligence supported by evidence the insured know or should have known at the time the insurer made a decision on a claim."

Insurance Companies have a duty:

*To promptly investigate your claim

*Communicate regularly with you regarding the status of your claim

*Promplty pay you any undisputed portion of claim

*Provide a prompt and reasonable explanation of any claim denial or offer compromise settlement.

Maryland has now joined more than thirty States in extending first-party bad faith recovery to those injured in car accidents as well as those that have sustained damage to their property (automobile and home).

Over time, Insurance companies will be less likely to require plaintiffs to go through a trial to recover the money they deserve in the first place.

So what do you do when an insurance company does not act in good faith?

Before this new law, insureds had no real recourse against their Insurance Company when their property damage claims were not handled in "good faith". When your recovery was limited to the damage to your vehicle, most people couldn't affort to hire an attorney to represent them. Under the new law, attorneys can recover their attorney fees (up to one-third of the actual damages) as well as the expense of hiring experts and other costs if an insurance company is not acting in good faith.

For the past several years, Insurance Companies such as Maryland Automobile Insurance Fund (MAIF), State Farm Insurance Company, GEICO (Government Employee Insurance Company) Traveler’s Insurance Company, Allstate Insurance Company, Liberty Mutual Insurance Company and others, have hired companies such as CORVEL to "audit" their insured’s medical bills for "reasonable and necessary" charges. Medical bills that are owed by an injured person were not being paid fairly by their insurance company under the Personal Injury Protection (PIP).

Here's an example from our firm: My client received a bill for $194.00 from the emergency room physician. His insurance company, GEICO refused to pay more than $70.20 of that bill leaving my client to pay $123.80. He has insurance, but they are simply refusing to pay, and leaving my client with the bill. But that's only one bill, other bills for this client include a bill for chiropractic treatment and doctors visits for which $804.90 was denied payment by GEICO. These unreasonable and unnecessary cuts in payment of medical bills harm the injured person -- the person who paid the premiums every six months!

This also hurts the medical providers, because they are not getting paid. My client is out of work and can't pay this bill. GEICO is responsible for this bill, but is shirking its responsibility. If the rest of the medical bill goes unpaid, the medical providers will send the bill to collections which affects the me client's credit and may result in a judgment against my client. With this law, attorneys can hold insurance companies responsible when they do not act in good faith.

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The Minnesota Assocation for Justice is taking advantage of a recent jury verdict in Hennepin County to make its point regarding the need for a good faith law in Minnesota. A push for the law failed in the Legislature this year.

The plaintiff in the case, Charles Dack, lost two young sons in a car accident. When Progressive Insurance offered only $5,000 for each son, Dack took the case to a jury, which awarded him $1.57 million. Settlement negotiations were complicated by the fact that the boys’ young parents had never married and each lived with one of their parents. According to the MAJ press release announding the verdict, Progressive tried to capitalize on the situation by offering to settle for far less than what the family’s policy was worth.
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