How Much Is My Insurance Bad Faith Claim Worth?

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Facing an insurance claim denial or delay can be a daunting experience, leaving policyholders wondering about their rights and potential compensation. In Wisconsin, as in many other states, insurance bad faith claims provide a legal recourse for individuals who believe their insurers have acted unfairly or in bad faith. However, determining the worth of such a claim involves a nuanced understanding of various factors. In this article, we will explore the key elements that contribute to the valuation of insurance bad faith claims in Wisconsin.

What Is Insurance Bad Faith?

Insurance bad faith occurs when an insurance company fails to fulfill its contractual obligations or unreasonably denies a valid claim. In Wisconsin, like most states, insurance companies are required to act in good faith and fair dealing with their policyholders. Bad faith actions may include unreasonably delaying claim processing, wrongful denial, inadequate investigation, or unjustly denying policy benefits.

The Wisconsin Supreme Court has held that “some breach of contract by an insurer is a fundamental prerequisite for a first-party bad faith claim against the insurer by the insured.” In other words, if there is no coverage, there can be no bad faith. It is important to note that not every insurance dispute over coverage or the amount of damage is bad faith.

What Factors Influence the Value of a Bad Faith Claim?

The value of an insurance bad faith claim will always depend on the unique facts of a specific case. When assessing the potential damages, the following are things that we would consider:

Policy Limits:

The limits of your insurance policy play a crucial role in determining the potential value of your bad faith claim. If the insurance company’s actions lead to a wrongful denial that exceeds your policy limits, the value of your claim may be higher.

Actual Damages:

The actual damages you have suffered due to the insurance company’s bad faith practices are the most significant factor to the ultimate value of a bad faith claim. This may include additional property damage, duplicate expenses, additional living expenses, and other financial losses directly related to the insurance claim.

Legal Fees and Costs:

Recoverable legal fees and costs can also influence the worth of your insurance bad faith claim. Wisconsin law allows you to recover these expenses as part of your claim.

Can You Recover Damages For Emotional Distress as a Result of Bad Faith?

Under Wisconsin law, a recovery for emotional distress caused by an insurer’s bad faith refusal to pay an insured’s claim should be allowed only when the distress is severe and substantial other damage is suffered apart from the loss of the contract benefits and the emotional distress.  To be considered “severe” The emotional distress must be  “an extreme disabling emotional response.” “Substantial other damages” means are considerable in amount and intended as real compensation for a real injury. Therapy or hospital costs may be emotional distress damages that could arise due to the insurance company’s bad faith.

Can You Recover Punitive Damages for Insurance Bad Faith?

In some cases, Wisconsin law allows for the recovery of punitive damages. These damages are intended to punish the insurer for its egregious conduct and deter similar behavior in the future. The presence of punitive damages can significantly impact the overall value of your claim. Although punitive damages are available, they are rare. Punitive damages are only awarded where the insurance company has acted with (1) evil intent, ill-will, or malice deserving of punishment; (2) wanton disregard of duty; or (3) gross or outrageous conduct.

Considerations that may factor into an Award of Bad Faith Damages:

The strength of your evidence is crucial in establishing the insurer’s bad faith. Clear documentation of communications, procedures, and relevant evidence strengthens your case, enhancing its overall value.

Duration of the Bad Faith Conduct:

The length of time the insurance company engaged in bad faith practices can impact the claim’s value. Prolonged or repeated instances of wrongful conduct may lead to a higher valuation.

Case Study:

In  Miller v. Safeco Insurance Company, a case where Anthony Murdock second-chaired the trial and was responsible for all the briefing, the court awarded bad faith damages. Miller provides a good overview of the types of damages that may be recovered.

 In Miller, the insureds established that Safeco improperly failed to provide coverage for the loss of their home. At trial, we established that Safeco’s coverage denial was in bad faith. The Miller court then concluded that the following damages were proximately related to Safeco’s failure to provide coverage:

As a result of Safeco’s bad faith, the Millers were forced to maintain two residences and incur some duplicate costs. Safeco does not contest that some of these costs were incurred, including costs incurred in duplicate tax payments ($11,609.91), duplicate water and sewer payments ($1,494.97), duplicate electrical and gas payments ($2,997.32), and attorneys’ fees and expenses in the present action ($213,602.39, subject to supplementation). I find that these additional costs, totaling $229,704.59, were proximately caused by Safeco’s bad faith and they will, therefore, be awarded to the plaintiffs, subject to the Millers’ supplementation of attorneys’ fees and expenses. The Millers were also awarded the additional interest on their mortgage( $68,181.52) and the costs for attempts to mitigate the loss before they determined that it was a total loss. ($3,000).

Miller v. Safeco Ins. Co. of Am., 761 F. Supp. 2d 813, 827 (E.D. Wis. 2010)

            The Court concluded; however, that other damages such as the loss of the sale of the Miller’s prior residence were not proximately caused by Safeco’s bad faith because there wasn’t sufficient evidence that the Millers would have sold the house. The Court noted that the Millers had rejected two offers. Although the availability of potential bad faith damages is broad, the damages must be caused by the bad faith denial. The damages must be actual rather than speculative.

Conclusion:

Wisconsin law guides bad faith claims. Your claim’s worth depends on the unique facts of your case. Murdock Law can help you navigate complexities and seek fair compensation for your denied or underpaid insurance claim. If you’ve faced insurance bad faith in Wisconsin, understand your rights. Contact us to obtain the compensation you deserve.

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