Many people will agree with the statement that insurance companies don’t hold up their end of the bargain when it comes to paying out claims. What constitutes “fair” and “good faith” claim handling has long been a question in dispute. However, our Supreme Court has recently helped draw the line a little more clearly.
In Peterson v. Western National (Minn. 2020), the Court helped insurance companies understand that they cannot simply evaluate cases based on whatever “truth” is most convenient to them. In this case, Ms. Peterson was injured in a car accident and had headaches and other injuries that required extensive treatment. When she presented her claim to Western National—her own insurance company—asking that they live up to their obligation to pay Underinsured Motorist Benefits (because the at-fault driver’s liability coverage wasn’t enough), Western National refused to offer any money. In fact, they tried to claim they had not received records when it was clear that they had.
Peterson sued to enforce the contract and prove her damages. The appointed jury awarded almost a million dollars and Western National paid their policy limits of $250,000. The interesting part is what happened after they paid: they were sued for failure to evaluate her case in good faith.
The Court helped to provide a two-prong test for evaluating the conduct of Western National:
The insurer did NOT have a reasonable basis for denial, AND
The insurer either KNEW it did not have a reasonable basis or RECKLESSLY DISREGARDED whether it had a reasonable basis.
When looking at Prong 1, the Court said it requires a “fair evaluation.” In other words, the insurer must consider and weigh ALL of the facts and circumstances that a reasonable insurer would consider relevant. They cannot simply pick out facts that would support a denial.
When looking at Prong 2, the “intention” of the insurance is in question. The Court explains that it’s what the adjuster “knew, or recklessly disregarded or remained indifferent to” that buries them on a bad faith claim. Here, the adjuster’s own attorney told her that the claim was worth far more than the amount at which it had been evaluated, but they proceed to “see no evil, pay no claims” (my verbiage).
As a result of their conduct, Western National was punished and the bad faith claim sustained.
We at Aaron Ferguson Law extend a hearty congratulations to the Plaintiffs’ attorneys that fought hard for this win. We know adjusters like to imagine alternate universes where they don’t have to pay money—it’s our job to bring them back down to earth.
If you or a loved one is in need of justice, please call 651-493-0426 to schedule a free consult with one of our talented attorneys.