hall of shame - insurance company bad faith law resources and information

Contained on this page are examples of "insurance company bad faith." We like to call it our "Hall of Shame." Every so often, we recognize an extremely bad case of insurance company bad faith with our infamous "Unclean Hands Award."

Be forewarned! Some of these bad faith cases are quite egregious!

FEDERAL INSURANCE COMPANY CONCEALS COVERAGE IN BAD FAITH AND FORCES POLICYHOLDER TO LITIGATE A SECRETLY COVERED CLAIM Federal Insurance Company, part of the Chubb Group of Companies, concealed coverage from its policyholder and forced the policyholder into litigation. That is the decision of the Court of Appeal in Los Angeles on August 27, 2001 in the case of Silgan Containers Corp. v. Federal Insurance Company, No. B126141. In a case involving a defective product, Federal secretly determined that a multi-million dollar claim was covered by Federal's policy, but decided to conceal that finding of coverage from the policyholder. Instead, Federal told the policyholder that the claim was not covered and filed suit against the policyholder. Under cross-examination at trial, Federal admitted that it had decided, two years prior, that the claim was covered; but decided not to tell the policyholder of that fact. Read the decision here.

Travelers - on April 22, 1998, the California Court of Appeal upheld a $25,000,000 punitive damage award against Travelers, for breach of the duty to defend an environmental claim brought against the operator of an auto body repair business. The court held that "Travelers' behavior toward Vann, personally, and as indicative of a broader recalcitrance to honor contractual obligations and the rule of law, manifests a high degree of reprehensible conduct." The court also noted that "Travelers had a nationwide practice of refusing to honor claims arising from environmental damage." Excerpts from this decision are reproduced right here.

State Farm - in State Farm Cas. Co. v. Taylor, 54 Cal.App.4th 625 (1997) the California Court of Appeal upheld the criminal fraud exception to attorney-client communications between State Farm's claim handlers and State Farm's attorneys. The case involves allegations that State Farm forged signatures on applications for earthquake insurance. The court noted that "the declaration of Samantha Boyd established that in 1990 State Farm adopted a policy of destroying potentially relevant documents to avoid producing them in bad faith actions." Id. at 647. The court also reviewed the testimony of Amy Zuniga, a claims specialist, who was advised by a senior executive "that State Farm witnesses should not admit that forgeries happen, unless and until they are compelled to do so by a court order." Id., at 648.
A recently filed case alleges that State Farm engaged in a "widespread practice of forging and faking insureds' signatures on State Farm insurance documents." Cohen v. State Farm Mutual Automobile Ins. Co., Superior Court, Los Angeles County.

AETNA - on May 8, 1998, the Ninth Circuit Court of Appeals upheld a bad faith verdict against Aetna for denying disability benefits. In Ace v. Aetna Casualty Co. the court noted that the evidence was undisputed that:

(1) Aetna did not investigate the claim;

(2) failed to provide a reasonable explanation for its denial of the claim;

(3) falsely advised the claimant that Aetna had no claim adjustment guidelines; and numerous other misdeeds.

The denial of benefits forced the claimant to sell her home, send her eldest son to live with another family, and to live in her car. The court did, however, find that the amount of punitive damages, $16.5 million, was excessive.
Argonaut - Workers Compensation Insurance

In Diamond Woodworkers, Inc. v. Argonaut Ins. Co., 109 Cal. App. 4th 1020 (2003) the appellate court upheld a jury verdict for bad faith and fraud in failing to provide coverage for "leased employees". The court reduced a $14 million award for punitive damages to $1 million (four times compensatory damages), following the Supreme Court's decision in State Farm v. Campbell.
Paul Revere /Unum Provident - Disability Insurance

The federal court decision in Handgarter v. Paul Revere (Nov. 2002) upholds a $5 million punitive damage award and details a company-wide scheme to deny disability benefits to save money for the insurance company.

A California jury in state court awarded $30 million in punitive damages against Unum Provident for terminating the long-term disability benefits of an eye surgeon. The trial judge reduced the damage award to $5 million. Chapman v. UnumProvident (Jan. 2003).

Truck Insurance Exchange - Pollution Coverage

Truck misrepresented policy provisions by stating that a pollution exclusion barred coverage for contamination at a car dealership. A $30 million award by a California jury was reduced to $3 million in an unpublished decision in Earnest v. Truck Insurance Exchange. (Nov. 2002)

Truck Insurance Exchange - Failure to Defend Advertising Injury Claims

Truck Insurance failed to defend the maker of a surgical device against allegations of advertising injury and unfair competition. A jury award pf lost profits in the sum of $4.5 million was upheld in an unpublished decision. (June 2002).

New Hampshire Ins. Co. - Additional Insured Coverage

New Hampshire Insurance Co. denied a defense to a gasoline refinery on Grounds that the additional insured endorsement did not provide coverage. In an unpublished decision, a $4.5 million punitive damage award was upheld. Tosco v. New Hampshire Ins. Co. (Oct. 2002)

National Union - Certificate of Insurance

National Union denied coverage for a school bus, claiming it had been deleted from an insurance policy. A $10 million punitive damage award was re3duced to $1.7 by the Court of Appeal in an unpublished decision (June 2002).

If you have been a victim of of any of these practices, please let us know.

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last modified Dec 02, 2005 / 01:15 AM, GMT